[Senate Hearing 116-497]
[From the U.S. Government Publishing Office]


                                         S. Hrg. 116-497

                  PRESIDENT'S 2020 TRADE POLICY AGENDA

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                                HEARING

                               BEFORE THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 17, 2020

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                     
                                     

            Printed for the use of the Committee on Finance

                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
45-894-PDF                 WASHINGTON : 2021                     
          
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                          COMMITTEE ON FINANCE

                     CHUCK GRASSLEY, Iowa, Chairman

MIKE CRAPO, Idaho                    RON WYDEN, Oregon
PAT ROBERTS, Kansas                  DEBBIE STABENOW, Michigan
MICHAEL B. ENZI, Wyoming             MARIA CANTWELL, Washington
JOHN CORNYN, Texas                   ROBERT MENENDEZ, New Jersey
JOHN THUNE, South Dakota             THOMAS R. CARPER, Delaware
RICHARD BURR, North Carolina         BENJAMIN L. CARDIN, Maryland
ROB PORTMAN, Ohio                    SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania      MICHAEL F. BENNET, Colorado
TIM SCOTT, South Carolina            ROBERT P. CASEY, Jr., Pennsylvania
BILL CASSIDY, Louisiana              MARK R. WARNER, Virginia
JAMES LANKFORD, Oklahoma             SHELDON WHITEHOUSE, Rhode Island
STEVE DAINES, Montana                MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana                  CATHERINE CORTEZ MASTO, Nevada
BEN SASSE, Nebraska

             Kolan Davis, Staff Director and Chief Counsel

              Joshua Sheinkman, Democratic Staff Director

                                  (ii)


                            C O N T E N T S

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                           OPENING STATEMENTS

                                                                   Page
Grassley, Hon. Chuck, a U.S. Senator from Iowa, chairman, 
  Committee on Finance...........................................     1
Wyden, Hon. Ron, a U.S. Senator from Oregon......................     3

                         ADMINISTRATION WITNESS

Lighthizer, Hon. Robert E., United States Trade Representative, 
  Executive Office of the President, Washington, DC..............     5

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Grassley, Hon. Chuck:
    Opening statement............................................     1
    Prepared statement...........................................    53
Lighthizer, Hon. Robert E.:
    Testimony....................................................     5
    Prepared statement...........................................    54
    Responses to questions from committee members................    57
Wyden, Hon. Ron:
    Opening statement............................................     3
    Prepared statement...........................................   100

                             Communications

American Chemistry Council.......................................   103
American Farm Bureau Federation..................................   109
Americans for Free Trade et al...................................   114
Center for Fiscal Equity.........................................   120
Coalition for GSP et al..........................................   124
Distilled Spirits Council of the United States, Inc..............   128
Engine Advocacy..................................................   132
Flexible Packaging Association...................................   136
Motor and Equipment Manufacturers Association....................   138
National Retail Federation.......................................   140
National Taxpayers Union.........................................   145
U.S. Global Value Chain Coalition................................   151

                                 (iii)

 
                  PRESIDENT'S 2020 TRADE POLICY AGENDA

                              ----------                              


                        WEDNESDAY, JUNE 17, 2020

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The WebEx hearing was convened, pursuant to notice, at 3:02 
p.m., in Room G-50, Dirksen Senate Office Building, Hon. Chuck 
Grassley (chairman of the committee) presiding.
    Present: Senators Roberts, Cornyn, Thune, Burr, Portman, 
Toomey, Scott, Cassidy, Lankford, Daines, Young, Wyden, 
Stabenow, Cantwell, Menendez, Carper, Cardin, Brown, Bennet, 
Casey, Warner, Whitehouse, Hassan, and Cortez Masto.
    Also present: Republican staff: Mayur Patel, International 
Trade Counsel. Democratic staff: Sarah Bittleman, Policy 
Director for Senator Wyden.

 OPENING STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM 
              IOWA, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. We are glad to have you here, because we face 
great challenges, whether it is the murder of George Floyd, or 
whether it is the economic downturn we have because of the 
pandemic, or the pandemic itself. We have a lot facing our 
country.
    It is not going to be easy to bring us back to the course 
we were on in February, but I think good trade policy will be 
one important part of doing so. So I am glad that we will have 
that discussion today.
    Trade policy is immediately significant because we need to 
make sure that we do not have any unnecessary taxes on goods 
key to the recovery or in fighting the pandemic. That is why I 
have asked the International Trade Commission to conduct a 
study on precisely what those goods are, where they come from, 
and how much they are taxed. This study, which is ongoing, will 
provide an independent and transparent snapshot of the medical 
and PPE supply chains. It is important that we carefully study 
these supply chains before we rush to judgment and action. We 
have to take a long, hard look at our ability to protect 
ourselves in future crises. But we have to find a smart 
solution that accepts the reality that trade is fundamental to 
our survival and prosperity.
    In the long term, trade is a key part of the solution, 
because it promotes freedom. It provides customers for our 
best-in-class agriculture products. It eliminates arbitrary 
barriers that inhibit entrepreneurship and independence. In 
particular, trade empowers small businesses that are the 
backbone of our communities. In fact, 97 percent of the U.S. 
exporters are small businesses.
    A good start to empowering people and fixing our economy is 
making sure as many people as possible have the option of being 
their own boss. We owe it to them and their communities to 
press for even more opportunities. This is especially true 
because our trading partners already enjoy the fact that we 
have one of the most open economies in the world.
    Ambassador Lighthizer, you have taken important steps to 
help with these issues I have just raised. I am pleased this 
year started off with Congress approving the U.S.-Mexico-Canada 
Agreement. USMCA is expected to spur 176,000 new jobs and 
create new opportunities with our two most important trading 
partners.
    We are just a couple of weeks away from the USMCA entering 
into force, and we owe it to our American farmers, workers, 
businesses, and innovators to make sure this agreement 
delivers. I look forward to implementing a new era of North 
American free trade and focusing on the many other issues on 
the President's trade agenda. The issues are complex and 
challenging, but the Trump administration is ambitious. If we 
get them right, the opportunities for Americans are immense. 
And I want to highlight a few in particular.
    First, we have free trade negotiations with the United 
Kingdom. Good trade relations with the United Kingdom are 
crucial. In 2017, we exported almost $126 billion of goods and 
services to the UK. UK companies in turn have invested more 
than $540 billion in the United States.
    Unfortunately, those numbers do not reflect our full 
potential. In large part, EU rules stood in the way. These 
rules unfairly restricted our agricultural goods without any 
scientific basis, and required duplicative and unnecessary 
testing for industrial goods. Now that the UK has been freed 
from those EU rules, we can bring our economic relationship to 
a level befitting our longstanding political special 
relationship. An improved trading relationship with the UK will 
also signal to the European Union that it is past time for them 
to start regulating on the basis of sound science.
    I am also looking forward to trade negotiations advancing 
with Kenya, and you had earlier talked to us about that step. 
We do not have a single free trade agreement with a sub-Saharan 
country. I applaud the Trump administration for being the first 
administration to take this on. A high-standard free trade 
agreement with Kenya can be a model for both good economics and 
good governance throughout the region.
    Third, I am glad the administration remains committed to 
WTO reform. The rules of that organization, including those on 
services, agriculture, procurement, and intellectual property, 
are vital for workers and businesses. They reflect decades of 
persistent American leadership. We cannot let China take the 
pen when it comes to writing the rules for that organization. 
Instead, Congress and the administration must work together to 
fix this vitally important institution. We will revitalize the 
WTO's negotiating function so that the rules reflect the modern 
economy, including e-commerce. Additionally, Congress will 
continue to insist that rules remain enforceable--and applied 
as written.
    That is why I am glad the trade agenda highlighted the 
administration's WTO enforcement wins against the EU over its 
Airbus launch aid; against China over its policies on wheat, 
corn, and rice; and India over its export subsidies. There are 
a lot of problems with the WTO, but it has an important role to 
play--including through the use of binding dispute settlement. 
The trick is to make sure those rules are followed, rather than 
rewritten, by WTO judges.
    Mr. Ambassador, I think together we can accomplish this 
task.
    Finally, I note that the trade agenda highlights that the 
administration took strong action against discriminatory 
digital services taxes. With the recent announcement of more 
investigations, the Trump administration is demonstrating that 
America will not stand for discriminatory treatment that treats 
American companies as piggy banks. Our businesses are entitled 
to fair and equitable treatment, and we will defend our rights 
appropriately.
    In closing, I want to emphasize this point: the President 
has laid down an ambitious agenda that can improve the lives of 
our fellow citizens. But it will require commitment and 
cooperation from all of us. The Constitution vests Congress 
with the authority over trade, not some generalized interest in 
trade. We cannot simply be passengers along for the ride. We 
must fulfill our constitutional role so that our trading 
partners know that Ambassador Lighthizer has the full support 
and power of the United States behind him.
    [The prepared statement of Chairman Grassley appears in the 
appendix.]
    The Chairman. Senator Wyden?

             OPENING STATEMENT OF HON. RON WYDEN, 
                   A U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you very much, Mr. Chairman, and 
welcome to the Ambassador. We can actually see him out there.
    This is the Finance Committee's fourth annual hearing on 
the Trump trade agenda, and that means that it is the fourth 
time the committee has heard a familiar old routine. Donald 
Trump is getting tough on China, and he is protecting American 
jobs everywhere. The President is cracking down, once and for 
all, big changes around the corner, and an American economy on 
the brink of transformation. It has been 3\1/2\ years of those 
big promises. So I want to start by laying out the actual 
results.
    The Phase One trade deal with China that the President 
called, and I quote, ``the biggest deal there is anywhere in 
the world by far'' is already coming apart, with China falling 
behind on commitment. According to an analysis by the Peterson 
Institute looking at the first 4 months of the deal, China's 
purchases of U.S. manufactured goods were at 56 percent of the 
target level set by the Phase One China deal. China's purchases 
of U.S. agricultural goods were at 38 percent.
    President Trump said he would stop the overproduction of 
steel in China that has wiped out so many steel jobs here in 
the United States. But, colleagues, mills in China are 
producing steel at record levels. The President said he would 
fix the most damaging ripoffs that target American innovation 
and jobs. But when it comes to IP theft or forced technology 
transfers, the Phase One China deal recycled existing law and 
repeated the same promises that China has broken again and 
again.
    According to the Economic Policy Institute, the United 
States has lost 3.7 million jobs to China in the last 2 
decades--three-quarters of them in manufacturing. Donald Trump 
has not meaningfully changed any of the conditions that allowed 
these job losses to happen. Now the bottom line with respect to 
China trade policy is really clear. The status quo under 
President Trump is good for China, and the Chinese Government 
is reportedly interested in maintaining it.
    Now, on to the new NAFTA. Ambassador Lighthizer and I long 
agreed that NAFTA needed a major overhaul. It was not built, 
for example, for an economy to a great extent driven by digital 
activity and industries, and it was not strong enough on 
enforcement to protect American workers.
    When the Trump administration first brought its 
renegotiated deal to the Congress, it made some progress on 
digital issues, but it did not go nearly far enough to protect 
family-wage jobs and workers with tough rules on labor and 
environmental protection. In fact, the old, broken-down system 
of enforcement from the old NAFTA was really pretty much still 
a part of the Trump administration's approach for the new 
NAFTA. That meant that all the big claims about getting a great 
deal for workers were just more of the same old happy talk on 
trade.
    Now when that was brought to the Congress, Democrats in the 
Senate and House said that it was unacceptable, and we went to 
work to improve the areas where the President's proposal on 
NAFTA came up short. Senator Brown and I worked, for example, 
with our colleagues to develop a faster, more aggressive 
approach to labor enforcement so that American workers will not 
have to spend years, literally, waiting for action against the 
trade cheats and the trade ripoff artists. Ambassador 
Lighthizer helped us get that done, and now the deal is set to 
go into effect in 2 weeks.
    But the start of the deal, colleagues, means that the work 
is just getting started. I have major concerns about Mexico's 
ability to stay on track with implementing their labor 
obligations, and with our ability to monitor and enforce them. 
The administration has to hit the ground running on trade law 
enforcement on day one.
    There are a few other areas where American businesses, 
producers, and workers need more information and more certainty 
as the agreement heads into effect. Our dairy farmers, for 
example, need to know that their products will not face unfair 
discrimination by Canada and Mexico. American innovators need 
assurances that Mexico will make changes that it promised to 
its intellectual properly laws. Finally, American automakers 
need to know how USTR and the Department of Labor will apply 
the auto ``rules of origin'' which impact their supply chains 
and their ability to qualify for tariff benefits.
    My bottom line on the new NAFTA is that it made real 
progress on several key issues, and that is why it got 
overwhelming support from this committee and the Senate. But we 
understand--which is why this hearing is so important--that 
this progress can be undone very quickly if the administration 
does not take the strong steps needed to enforce the deal, 
particularly using the enforcement tools the Congress created 
to protect American jobs. And that is going to be a prime focus 
of our work in the days ahead: to make sure the administration 
uses those trade enforcement tools that were given to them.
    Finally, let me thank Ambassador Lighthizer for joining us. 
I am quite certain I am not the only Democrat on this committee 
who has been appreciative of him constantly reaching out trying 
to find bipartisan ground, and I think my colleagues know that 
questions and answers with Ambassador Bob Lighthizer will never 
be dull.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Wyden appears in the 
appendix.]
    The Chairman. We have a lot of business to cover. I have 
only a one-sentence introduction of Ambassador Lighthizer. He 
was sworn in as the 18th United States Trade Representative on 
May the 15th, 2017.
    Please give us your opening statement, Ambassador 
Lighthizer.

  STATEMENT OF HON. ROBERT E. LIGHTHIZER, UNITED STATES TRADE 
REPRESENTATIVE, EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON, 
                               DC

    Ambassador Lighthizer. Well, thank you, Mr. Chairman. Mr. 
Chairman, Ranking Member Wyden, and members of the committee, I 
wanted to start off by saying I have missed seeing you, but I 
cannot see most of you in any event. I cannot probably 
accurately say that. I have Senator Young, whom I can actually 
see, in this room. This is, for me at least, an unusual 
experience. But I am assuming you are out there.
    We have been going through two crises recently, and these 
indeed are challenging times. I will not go through all the 
history of it, but I want to say that I am confident, working 
together in good faith, we can all help to heal the wounds in 
this Nation. And I certainly, as the USTR, want to play my 
part.
    In some ways, the problems we have been facing recently 
make talking about international trade seem less important, but 
in other ways, perhaps, rebuilding our economy and helping to 
create good-paying jobs for all Americans, securing fairness 
for our businesses, and bringing back manufacturing can be some 
part of the solution.
    We have been isolated and quarantined for so long, I fear 
that we might have forgotten what great achievements we had 
during the early part of this year--all of us together. 
Republicans and Democrats, House and Senate, worked closely 
with the administration to write and pass the biggest, and I 
would say the best trade agreement in American history--USMCA.
    I would like to again thank you for working with me and my 
team to achieve this historic accomplishment. I would also like 
to thank you for your support and help as we worked our way to 
the China Phase One agreement, a very important U.S.-Japan 
agreement, and numerous other small agreements during this last 
year. Together, I think we have helped American workers, 
businesses, farmers, and ranchers. Going forward, there is much 
to achieve. As you all know, we have an active FTA negotiation 
with the United Kingdom. We also will very soon, in the next 
couple of weeks, commence talks with Kenya.
    Finally, we have active engagements on trade issues with 
numerous other countries, and of course I look forward to 
working with all members on the crucial issue of WTO reform.
    Thank you to all the members for working so closely with 
me, for making time to talk and to meet with me, for having 
your staffs--which is so crucial to this process--work so 
closely with USTR, and for making our end product consistently 
better as a result of your work and your staffs' work.
    So that is my statement. But I will just continue for a 
second, because Senator Wyden was so kind as to bring up what, 
I agree with the President, is the greatest trade agreement.
    So we start off with the proposition that China is a very, 
very big problem. We move to the next step of the logic, which 
is that every administration before the President did nothing--
absolutely nothing. The problem got worse. None of them did 
anything.
    I am sitting here thinking I feel a little bit like what 
Roosevelt would have felt like if Hoover came forward and said, 
``I want to talk to you about depressions,'' or if Chamberlain 
had talked to Churchill about German policy. The reality is, 
nobody did anything.
    There was this great agreement on cybersecurity that the 
Obama administration did with China. I went and I said, ``Show 
me the agreement.'' There is no agreement. It was two press 
releases that were not even coordinated. There was no 
agreement. It was nothing.
    So we have now a written agreement. I have it right here. 
It covers more than just purchases. It covers IP, tech 
transfer, financial services, currency--it covers enormous 
amounts of ag SPS issues. And China is, for the most part, 
doing what they said they were going to do.
    And in addition, it contains $370 billion worth of tariffs 
on China. So to compare this to anything that was done before 
is just totally unfair. And this business about the purchases, 
which we get from the Peterson Institute, just so we 
understand, these are exports, many of which were booked months 
in advance.
    Everybody who knows agriculture knows if you look at what 
was shipped in March, it was not bought in March. It was bought 
weeks and weeks before that. So those numbers really are not 
telling.
    I am happy, as questions come, to go through the numbers 
with members. So with my staid opening comment and then my 
slightly less staid reaction to my good friend Senator Wyden, I 
will now stop talking.
    [The prepared statement of Ambassador Lighthizer appears in 
the appendix.]
    The Chairman. Okay. We will start with questions, and we 
will do 5-minute rounds.
    The steel and aluminum tariffs on Canada and Mexico are 
just one of the factors that delayed USMCA approval last year. 
I am glad they are gone and that we are about to start a new 
era of free trade in North America. However, I am concerned 
that some groups are trying to push to reinstitute tariffs or, 
if they do not reinstitute them, to find a workaround by 
putting section 232 tariffs on closely related goods. My view 
is that any issues concerning steel and aluminum tariffs need 
to be through the framework of the May 17, 2019 understanding 
that you negotiated with Canada and Mexico.
    The first question--but do not answer it until I ask the 
second question--is a commitment from you that the United 
States would continue to abide by that understanding, and will 
you also commit to briefing this committee in the event the 
administration believes that there is a surge in imports, and 
before any request for consultation is made under the 
understanding?
    [Pause.]
    Ambassador Lighthizer. I am sorry; I was told not to answer 
until you asked the second question. Is that all of the 
questions?
    The Chairman. Yes.
    Ambassador Lighthizer. We will certainly consult with the 
committee. I would say there have been surges on steel and 
aluminum, some from Canada, substantially from Canada; some 
from Mexico. And it is something that we are looking at and 
talking to both Mexico and Canada about.
    The way the agreement worked is, both countries agreed that 
they would maintain substantially the same trade as they had 
before. We are seeing surging in some products. If we in fact 
put the tariffs back on with those, they cannot retaliate 
except in that sector. So they cannot retaliate on agriculture 
and the like.
    And I am happy to talk to you, Mr. Chairman, and the 
ranking member, and other members as they indicate an interest 
in it. But it is something that is of genuine concern to us now 
and that we are looking at.
    The Chairman. For clarification, I will read my statement 
again. My view is that any issue concerning steel or aluminum 
tariffs needs to be done through the framework of the May 17, 
2019, understanding you negotiated. Are you saying ``yes'' to 
that?
    Ambassador Lighthizer. So, yes. The answer is ``yes.'' So 
that is our understanding with Mexico and Canada, that we would 
let them out of the tariffs on the condition they maintain the 
same trade flows. And if they did not and we put tariffs on 
because they surged, they would only retaliate in that sector 
and not in other sectors.
    The Chairman. I am glad that USTR decided to grant 
exclusions from section 301 tariffs from certain products 
related to combating the pandemic. I am also glad USTR is 
accepting public comment until June 25th on what additional 
medical products could benefit from lifting tariffs. However, 
some of the exclusions USTR has granted will expire in the next 
few months.
    Can you tell us whether you will consider extending the 
existing pandemic-related exclusions and granting additional 
exclusions for relevant products?
    Ambassador Lighthizer. So what we expect to do, Mr. 
Chairman, is make an assessment as to whether or not there is a 
critical need for those products related to the pandemic. If 
there is, then we will extend them, yes, for sure. If there is 
not, we will not.
    The Chairman. USMCA had a side letter addressing certain 
geographic locations. This is a very important issue for our 
farmers. As your Special 301 report this year noted, the driver 
of the problem is the EU. The EU is hurting our market access 
by granting geographic indicators for common food names, or 
even terms defined in international standards, and also pushing 
our trade partners to adopt these protectionist measures.
    I think the UK negotiations need to reach a more ambitious 
outcome than the USMCA side letter, since the UK now has the 
opportunity to roll back these protectionist measures. This 
outcome needs to include an expanded list of dairy, meat, and 
wine products, and should be an integral part of the agreement 
rather than a side letter.
    That outcome would be consistent with U.S. law, which uses 
trademarks to protect consumers and the reputation of 
businesses, and not to limit legitimate competition. Would you 
be able to commit to seeking that level of ambition for an 
outcome on geographic indicators? And if not, why not?
    That will be my last question.
    Ambassador Lighthizer. Thank you, Mr. Chairman. The answer 
is, yes, I completely agree with your position. But it is a 
very difficult issue. To the extent that Europe and the UK make 
a deal, and they give away this space--and it is not clear they 
will give it away, or whether they will or they will not--but 
if they do, this is going to be a bigger and bigger problem.
    I agree completely on geographic indications, with your 
position. I agree that it is thinly disguised protectionism, 
and it is something that we have fought with Europe about and 
will continue to fight with them about, not just directly, but 
through proxies. And I agree with your position; whether we get 
it or not, we will also make an assessment as we move along.
    The Chairman. Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman.
    Mr. Ambassador, let's start with the new NAFTA. And we have 
appreciated your working with Senator Brown and I on the Rapid 
Response Trade Enforcement mechanism, and it is going to be key 
to coming out of the gate immediately in July and showing that 
we are serious about that. Because if we do not do that, it 
just seems to me that Mexico will be back to the same old kind 
of tactics to delay.
    So tell me, if you would first, how you are going to commit 
to actually putting the Brown-Wyden Rapid Response mechanism in 
place quickly.
    Ambassador Lighthizer. Yes; thank you, Senator.
    So first of all, I completely agree with your statement. 
Secondly, I am grateful for the work that you and Senator Brown 
did--and I would say other members of this committee--on 
enforcement provisions, Democrats and Republicans. And I agree 
with you completely that if we do not use the tools of 
enforcement that we have in the trade agreement, we are 
breaking our commitment with the Congress, but more importantly 
with the American people.
    So we have--as you know, because we have talked about 
this--we have made the appointments. We have set up the 
structure in terms of labor and environment. Both of the 
interagency committees have already had their first meetings. 
We expect to be very diligent on this.
    Obviously nothing can happen, as you say, until July 1st, 
but after July 1st I expect to consult with this committee and 
with the Ways and Means Committee, look at complaints, and 
begin first some kind of a consultation process. And then to 
the extent we have problems, I expect to bring cases.
    And I think Mexico understands that--I hope they understand 
it. I have made it as clear as I can.
    Senator Wyden. Good. Let us go on then to another key 
enforcement issue, and that is China Phase One.
    The first stage of dispute resolution there is basically an 
escalating set of meetings. They get more and more urgent with 
influential officials. And my understanding is the agreement 
specifies that this whole process is confidential.
    So my question here is, does this confidentiality 
arrangement in the China Phase One deal mean that nobody, 
including members of this committee, will know if the United 
States is taking enforcement action against China?
    Ambassador Lighthizer. No, it does not mean that.
    Senator Wyden. Tell me how there is transparency then. 
Because as I read it, it just looks to me like there is not. 
And I think it would be helpful for you to be very specific 
here.
    Ambassador Lighthizer. Okay; absolutely. I will be happy to 
do that, Senator.
    So here is the situation we are faced with. For the first 
time, we have a written agreement. For the first time, we have 
a really, really good enforcement mechanism, one which 
escalates, and then the United States can take an action if we 
do not get a satisfactory resolution. And we will not be 
retaliated against.
    So this is a historic thing, and I want to point that out. 
Then you have the problem, what do you do with a company that 
comes and says, for example somebody from Oregon will come and 
say, ``I have this problem, USTR, and I want you to raise it. 
But do not use my name, because if you do, I may be retaliated 
against,'' right? ``I am giving you (a) confidential 
information, and (b) I may be retaliated against.'' So what do 
you do in a situation like that?
    We agreed to confidentiality. If you said, is it 
confidential from you in that case? No, of course not. But we 
are going to bring these--some of these complaints, depending 
on the circumstances--as generic complaints rather than 
individual ones to protect specific American companies. That is 
the nature of why we put that in there.
    And that does not mean, other than business confidential 
information, which we would not share, that does not mean we 
would keep the appropriate members of the Congress in the dark. 
We would not do that.
    Senator Wyden. Let us do this, because I want to get into 
one other time-sensitive matter. I would like to see in writing 
how we are actually going to have transparency in a provision 
that sounds to me like there is not transparency. I get your 
point with respect to sensitive matters with respect to 
American companies and American jobs. I think you get my point 
with respect to transparency. We will keep the record open on 
that.
    One last question, if I might. The chairman and I--and this 
has been a bipartisan area we have worked on--have been very 
concerned about these digital services taxes, because they 
really hit America's technology companies. Senator Cantwell and 
I, in our part of the world, they would hit our companies like 
a wrecking ball.
    And earlier today, the Treasury Secretary notified several 
of the largest European trading partners that he was going to 
suspend the multilateral negotiations. So when you hear 
something like that, it is kind of like, well, hey, we are just 
walking out of here. We are not going to do anything about the 
process. What is the administration's plan here to protect 
these critical industries from discriminatory taxation--
taxation that would really devastate our ability to have good-
paying jobs at a crucial time. What is the plan to deal with 
this?
    Ambassador Lighthizer. So thank you, Senator. And as you 
know, I completely share your view. And that is why, as the 
chairman said, we have already completed a 301 investigation on 
France, because they were the leader in this area. And now we 
have started a dozen others, where we are going to have reports 
on each one of them and authorize ourself to take retaliatory 
action if they do it.
    What Europe--and by the way, it is spreading beyond 
Europe--what they are doing is fundamentally unfair to American 
companies. They are picking on them because they are the best, 
and because they are not their companies. But I was going to 
say, when I used to sit in this room as a staff person, but it 
was a smaller room, Senator Long used to say, famously, ``Do 
not tax you, do not tax me, tax the man behind the tree.'' This 
is what everyone is doing. And unfortunately, we are the man 
behind the tree.
    So we put in place 301, as we think is appropriate, and we 
authorized action. Then the President worked out a deal where 
they would not collect the taxes, and we would not do anything 
on 301, and that was going to go on during the course of the 
negotiations at the OECD.
    Unfortunately, the other countries are completely--I am not 
leading this because it is the Treasury Department, but we are 
involved--but the other countries are completely dug in on 
this. We have to show our strength. And what the Secretary said 
is: ``If you all think you are going to get a consensus around 
taxing our companies unfairly, we are not going to be a part of 
it.''
    So I think that is the nature of it. We still have to, I 
believe, find the solution, right? And to me, that solution 
involves a lot of congressional action. It involves a tax 
scheme that treats everyone fairly internationally. And if we 
are treated unfairly, then I think the President will make a 
decision as to whether or not we take action against these 
people. But I do not think that what happened at the OECD was 
the end of a process of trying to work out a solution. We still 
have to do that.
    Senator Wyden. Thank you, Mr. Chairman.
    The Chairman. I think, since Senator Wyden brought that 
up--and I am glad he did because I have not read this letter 
that went from the Secretary of Treasury, but I think people 
ought to know where I stand. The press is reporting that the 
OECD negotiations on these taxes have hit an impasse, with the 
United States objecting to interim proposals that would 
continue to disproportionately target U.S. companies.
    I am continuing my consistent support of the Treasury 
Department to continue these efforts to reach a consensus with 
the OECD. We are in the middle of an unprecedented health and 
economic crisis, and our immediate focus needs to stay on the 
American people and the business community that employs them as 
we work together to develop solutions to our country's 
recovery.
    Reaching an agreement with the OECD represents the best 
outcome for resolving the international tax issues presented by 
our changing global economy, but those negotiations should not 
be rushed, especially during the current health and economic 
situation. It is better to take the time necessary to get fair 
and equitable solutions.
    So I support Treasury continuing to negotiate on these 
important global tax issues and working towards an agreement 
that does not disproportionately and adversely affect U.S. 
businesses. I remain firmly opposed to the unilateral measures 
with which OECD partners discriminate against U.S. businesses.
    I am going to name the first four people for questions: 
Senator Cantwell, then Senator Roberts, then Senator Stabenow, 
and then Senator Thune.
    Senator Cantwell. Thank you, Mr. Chairman.
    Ambassador Lighthizer, I have three issues to cover, so if 
you could, help me out with that. I wanted to talk about 
personal protective equipment. I know there are more than 40 
countries that have taken steps to eliminate tariffs on PPE.
    The United States has a 7-percent tariff on face masks, 
including N-95 respirators; South Korea temporarily eliminated 
those tariffs. We have tariffs on gloves, 3 percent. Canada 
suspended those. We have a 5.3-percent tariff on face shields, 
and 5-percent on gowns, and 2.5-percent on goggles.
    So, while you did waive the 301 tariffs of up to 25 percent 
on PPE from China, that only lasts through the end of the 
summer. So to me, why not join some of our allies--Canada and 
Europe--and just abolish tariffs on these PPE products until we 
are through the pandemic?
    Ambassador Lighthizer. So I would say, first of all, that 
as you say, we got rid of the tariffs because they would have 
been a problem, the 301 tariffs. We looked at, in the PPE area, 
23 different tariff lines. Of the 23 different tariff lines, 
there were no tariffs on over half of them. The highest was, as 
you say, one of the masks, which happens to be the category 
that has the N-95s in it.
    For surgical masks, however, there was none. In my 
judgment, zero tariffs for sure do not have any impact. Seven-
percent tariffs do not have any real impact. And we are better 
off keeping the tariffs in place and incentivizing American 
companies to make these products.
    At this point, we do not have the same shortage as I 
understand it--you are more of an expert on this, I am sure, 
than I am--that we had originally. But the important thing now 
is that we incentivize U.S. companies, many of which have just 
started undertaking to get into this business.
    Senator Cantwell. Yes, we definitely have a shortage. And 
N-95 respirators are needed now. They will be needed in a few 
months, and they will be in very high demand next fall.
    So I just listen to what my Governor says. I listen to him 
practically every week on his call and, you know, he wants the 
Defense Production Act. He does not think we are getting the 
masks. So to me, let us at least get them at a cheaper value 
than having to pay a tariff.
    And look, I feel the same way about a lot of green 
products. I think we should have zero tariffs, come to a world 
agreement on zero tariffs on products that would help us reduce 
carbon emissions.
    So, anyway, I just think zero tariffs. But I am more of a 
trade person on these things than maybe the administration.
    Okay, India and apples. The 232 tariffs remain. So India 
has a 70-percent tariff on apples--so obviously a big product 
in the State of Washington. What can we do to get those tariffs 
off of apples in India?
    Ambassador Lighthizer. As you know, we of course agree with 
you, and we agree that their regular tariffs are bad. Their 
retaliatory tariffs are even worse. We are in negotiations with 
India. We took away their GSP, and we are in the process of 
restoring it if we can get an adequate counter-balancing 
proposal from them. Until now, we have not done that. But this 
is something that we are actively negotiating right now.
    Senator Cantwell. Okay, and then where do we stand with 
what the ranking member, Senator Wyden, brought up with China 
and where we are in the Phase One agreement in making ag 
purchases? Definitely way off where we thought we would be. 
Where are we on getting those commitments to the Phase One 
products?
    Ambassador Lighthizer. That is a really good question 
because----
    Senator Cantwell. I think they purchased something like 
$4.2 billion of ag products out of the $33.4 billion that was 
committed to for 2020.
    Ambassador Lighthizer. So I understand. Let me spend a 
second on this, if I can. You only have 50 seconds left, but 
when you decide what the spending is in ag products, I realize 
we have this Peterson Institute thing, which I would suggest 
has a very, very failed methodology. What they do is, they look 
and they say, okay, fine, what was exported by such-and-such a 
date?
    The ag people know--and I know you are an ag person--that 
that stuff is bought at least 6 or 8 weeks in advance. So what 
you try to do is develop a methodology that says what actually 
is the level of purchases.
    Remember, this did not even go into effect until February 
14th. So anything that came in by March was probably even 
before the agreement, right? So it is a complicated thing, and 
they have a childish methodology.
    So what we have tried to develop is one that takes actual 
sales reports, which come out every Thursday for the previous 
week, and put them together with exports, all right? And the 
data is not created for this kind of a purpose, to tell on a 
short term what people are doing. And if you use the 
methodology that I suggest, which is purchases up till now to 
the extent you can calculate them--let me give you an example.
    Last week, China bought half a billion dollars worth of 
soybeans. Those might not ship until August, but if you say, 
well, we are going to gig them for not having purchasing, that 
is not right either, right? So you have to figure out this new 
methodology.
    If you do this kind of a hybrid methodology--and it is not 
foolproof; I do not want to suggest that it is, but it is like 
a good-faith effort to use the data that we have to try to tell 
whether they are doing it. I think a fair assessment is that 
they are clearly trying to meet the targets, particularly given 
the situation that we have going in the world with this COVID-
19.
    So you probably got about $10 billion--I have my notes 
here--about $10 billion worth of purchases towards the target 
of $40 or $50, all right? You then would say, okay, maybe $10 
billion additional are going to be at the end of the year on 
soybeans. And then you have to look at what you purchase kind 
of between now and then.
    And I think if you do, it is reasonable to make the 
assessment that we are going to get to those numbers, or 
awfully close to them.
    Senator Cantwell. Well, that is interesting. I definitely 
want to understand that. We have very highly perishable 
products from shellfish to cherries and other things, and we 
definitely want our ag products part of that Phase One 
purchase. So we will get back to you on the specific details.
    Ambassador Lighthizer. And I would suggest--I mean, I know 
your products, but I should work with your staff to make sure 
that we are putting--we are talking to them all the time about 
this. And you make a really good point. You have a very 
seasonal product--well, you have two seasonal products that I 
can think of, and so we really do have to press them adequately 
on that.
    Senator Cantwell. Thank you, Mr. Chairman.
    The Chairman. Okay; Senator Roberts?
    Senator Roberts. Mr. Ambassador, thank you very much. I 
want to thank you for your perseverance. I was talking to 
Senator Cornyn here, and I said that Bob Lighthizer probably 
has more perseverance than any other trade ambassador that I 
know of. And he sort of asked again, and I said, ``Here, look 
on Google. Look up the word `perseverance.' '' And by golly, 
the synonym for perseverance is ``Lighthizer,'' right there in 
Google. It just amazed me. So thank you for the job you are 
doing.
    I want to know about Mexico and what you and Ambassador 
Doud are doing with relation to Mexico and the new policies 
that do not adhere to the strong science and risk-based 
framework that we have long shared with them. I am talking 
about targeting certain tools of modern agriculture, crop 
protection chemistry, and biotech.
    Ambassador Lighthizer. So what we have is an 
administration, I believe, in Mexico for whom part of their 
philosophy is not to use cutting edge agricultural policy or 
practices. So for the last year and a half, they have not 
approved a single biotech application. I know you know this, 
but I am just sort of saying it for your colleagues. This is 
something that we find unacceptable.
    We have raised it with them. We have complained about it. 
When the agreement goes into effect, we will then have a 
mechanism to actually do something about it. My own view is, it 
is one of those things. It is like part of their philosophy. 
And until they lose a case, they are not going to be very 
flexible. But what you say is a serious, serious problem.
    What happens--for the other members--is that you get an 
application. It is approved over a period of time. Eventually 
it expires. If you do not get a new application, then that 
product does not go into Mexico anymore. And it is a question 
of seeds and the like, but it is also a question of pesticides 
and chemicals and the like. And we agree with you that it is a 
violation of USMCA, and we expect to bring an action if the 
situation continues.
    Senator Roberts. I appreciate that. I think there is some 
concern in farm country, when we get on virtual discussions 
with various ag groups now, and that question has come up a lot 
with the opportunities coming up with July 1st with regard to 
USMCA.
    I might remind you again that USMCA stands for the United 
States Marine Corps Always, as well as the good trade 
agreement. So they sign that, and then they--if they find that 
this is not working too well in terms of products we usually 
sell them and the products they need, obviously that is the 
time that they will probably come to the table.
    I want to talk about energy in China. By the way, I want to 
thank you, and especially Ambassador Doud. He has met with his 
Chinese counterparts time and time and time again. They are 
buying more--and I made a list here--pork, beef--not as much 
beef as we want--soybeans, and then sorghum. The sorghum folks 
were the first ones hit on the number one trade retaliation, 
and they are getting some price recovery. Not enough, obviously 
not enough, but we are making some progress.
    But on the energy side of it, they have been increasing 
purchases of certain products such as crude oil from Saudi 
Arabia and Russia. And my question is, can you share your 
thoughts on how you see China reaching the significant purchase 
targets laid out for the energy products in the Phase One 
agreement?
    Ambassador Lighthizer. First, let me just reinforce what 
you said about these other products. And if you look--I should 
have brought the charts. If you put a chart down for 2017, 
which was our best ag year ever, and now we are going to be 20 
percent above that in this deal--but if you do, and this is the 
line, 2017 best ever, if you look at meats up here already--we 
are three times what we sold in meats at this time in the year 
in 2017.
    Energy has been a problem. We have been stressing it with 
them. Energy for us is natural gas and the normal products, but 
for us at least it also is ethanol, where we need exclusions, 
and they have granted exclusions on ethanol. So I am hoping to 
see ethanol sales go up.
    But I would say the traditional liquefied natural gas, 
crude oil, refined products, there is no question they are 
behind there. It is something that we are stressing. I think it 
is as much a reflection of their economic situation, and the 
fact is, as you know well, that the prices just literally a 
while ago went through the floor. I mean the oil was worth less 
than the barrel. And I think that also has screwed up the 
mechanism. But it is something we are stressing with them and 
are going to continue to stress with them.
    Senator Roberts. Thank you, Mr. Ambassador. Thank you, Mr. 
Chairman.
    The Chairman. Now we have Senator Stabenow by TV. And, 
Senator Stabenow, before you start, can you tell me, do you 
have--and it would be applicable to everybody else who is going 
to be on TV, and that is three-fourths of the committee today--
do you have a way of telling when your 5 minutes are up?
    Senator Stabenow. I do not, and so I was hoping--at one 
point I thought the committee had a clock as a picture, but I 
do not see that today. So, Mr. Chairman, I will do my best 
here.
    The Chairman. Well, listen for the fall of the gavel at 5 
minutes.
    Senator Roberts. Chuck, I can help you with that. She is my 
ranking member. I can help.
    The Chairman. Okay; I will be glad for the help. Go ahead.
    Senator Stabenow. Okay, my 5 minutes starts now, right?
    The Chairman. Okay, go ahead. Yes, right now.
    Senator Stabenow. Well, thank you, Mr. Chairman, very much, 
and thank you, Ambassador Lighthizer, for joining us today. And 
I do have to join with my partner on the Agriculture Committee. 
Obviously you know I feel deeply about agricultural issues, and 
there are a lot of things that we need to continue to be 
talking about together. So I appreciate your reaching out 
continually on critical issues, when we agree and when we do 
not agree as well.
    But today I really want to take my time to focus on the 
pandemic that has highlighted so many risks and vulnerabilities 
for all of us. And I know that you and I agree we need to make 
changes so we can manufacture more critical supplies at home 
and work with our international partners to address the issues 
in the supply chains.
    But I have to say, watching this, particularly on the 
supply chain front and working with our Governor and her great 
team in Michigan, that the pandemic has highlighted just 
massive failures by the Trump administration. And we cannot 
just blame the supply chain disruptions for the fact that the 
United States has over 25 percent of the deaths from the 
pandemic, while we are only slightly over 4 percent of the 
world's population.
    So you said in a recent article in Foreign Affairs that the 
administration's goal is a balanced worker-focused trade policy 
that achieves broad bipartisan consensus and better outcomes 
for Americans. And I certainly agree with that statement. But 
we know that does not happen in a vacuum. And my worry right 
now is about what is happening--as we talk about workers 
abroad--what is happening to American workers right now, and 
how do they have confidence that they are going to be able to 
be safe at work.
    The administration's COVID-19 response has been a mess, 
frankly, on PPE. There has been no national strategy, as we all 
know, no transparency related to our country's ability to keep 
us safe or have the medical supplies and equipment made in 
America in the future, to be able to do that.
    And, while we are in a global economy, we have seen 
incredible threats to our citizens in relying on other 
countries for our basic medical needs, among other things. And 
frankly, if the President has such a great relationship with 
China, why have we not at least had a national agreement with 
them to get protective equipment and supplies that we need?
    I literally in Michigan, Mr. Ambassador, have been in 
multiple situations, reaching out to people I know in the 
medical field, where the conversation was, I know a guy who 
knows a guy who knows a guy in China, which is how we 
originally began to get our masks, N-99 and surgical masks and 
gloves and swabs and other equipment.
    So we still do not have enough specific data on the state 
of PPE, as well as the pharmaceutical drug manufacturing 
globally as well as in the United States, and frankly, in the 
USMCA we all remember the Trump administration tried to slip in 
a special benefit for pharmaceutical companies manufacturing 
drugs outside our country, which we all objected to.
    And so from my perspective, the President, instead of 
pointing fingers at everybody else and all our Governors trying 
to do the right thing, he should have been and should now be 
activating the Defense Production Act to guarantee that 
critical medical supplies are made in the United States.
    So when we look at--you have talked about the dignity of 
work, and I just want to say, I am from the front lines in 
Michigan. There is no dignity in nurses and hospital staff 
being forced to wear garbage bags to treat patients in COVID-19 
wards because they have run out of medical-grade protective 
equipment, most of which is currently made in China.
    So how do we have a worker-focused trade policy if the 
administration's domestic policy fails to focus on keeping our 
own workers safe right now?
    Ambassador Lighthizer. You will not be surprised to know 
that I do not agree with very much of what you said, except for 
the point that we want to work together on a worker-focused 
trade policy.
    I think that when this pandemic hit we were in a--this is 
not my area; I am not an expert at it--we were in a situation 
where we had depleted reserves of PPE as a result of failure to 
replace supplies in past, in the past administration.
    I think----
    Senator Stabenow. If I may just interrupt with just one 
quick point on that. The former Director of the Stockpile said 
in 2019, to this administration before the pandemic, that it 
was well-equipped. So I know there were a few areas where there 
needed to be more, but just so you know, the former Director of 
the Stockpile actually said it was well-equipped last year.
    Ambassador Lighthizer. Well----
    The Chairman. I will let you answer that, and then we will 
go to Senator Thune.
    Ambassador Lighthizer. I will just say briefly that the 
President used the Defense Production Act. We have gone all 
over the world to bring in PPE. I think the job that they have 
done is absolutely amazing. They created multiple ventilator 
producers. They have had this land bridge of shipments coming 
in by the billions. I think it is a very unfair--it is a very 
unfair criticism, in my judgment.
    Senator Stabenow. I appreciate that. There is a totally 
different picture on the ground. Thank you, Mr. Chairman.
    The Chairman. Senator Thune?
    Senator Thune. Thank you, Mr. Chairman.
    Ambassador, thank you for all you are doing to promote U.S. 
trade around the world. And I know that in testimony earlier 
today you said that the United States would not agree to a 
trade deal with the United Kingdom unless the UK lowered 
barriers and provided fair access for U.S. agricultural 
products, including U.S. meat imports.
    I applaud that position. You and I have talked time and 
time again about how much our ag producers are hurting, and how 
we can and should be doing more to help them. One way we can do 
more is by making sure that our trade agreements require our 
allies and trading partners to rely on sound science. Do you 
agree that many food standards are actually disguised 
protectionism? And the follow-up question is, what is the best 
way to stop that practice?
    Ambassador Lighthizer. So, Senator, I completely agree with 
you. I made the statement this morning that the European Union 
has raised this practice of using standards really as 
protectionism to a high art. And I believe they have.
    They now, in terms of some maximum residue levels they 
actually have, if there is any detection at all, the product is 
unacceptable. To me, that is just plain protectionism. And 
making every regulation science-based is the equivalent of 
getting rid of protectionism. It is the equivalent of getting 
rid of any other non-tariff trade barrier. And it is 
something--if anything, I would say Europe is going in the 
wrong direction and not in the right direction.
    They are being controlled by protectionist interests, and--
well, let me just leave it at that: protectionist interests. In 
my judgment, we have to insist on science-based standards for 
our farmers. And I would say this standard thing is not just ag 
issues. There are very good standards in industry too. It is 
not just in ag. It is a higher art in ag, but they use it in 
industry too. We have to look at that. And to the extent people 
deny us access, we should not give them trade. And if we do not 
have trade, then in my judgment we ought to be taking trade 
actions against them.
    And I am looking right now at whether or not some of these 
actions--I want to consult with you and your staff--whether or 
not right now we should be looking at a 301 on some of these 
things. It is getting so far out of control, where they say 
literally if there is any detectable residue, the product is 
unacceptable. That has nothing to do with science.
    Senator Thune. Absolutely. Thank you. You have our full 
support on that. Keep fighting that good fight.
    You had talked earlier about the digital services taxes 
that are being applied in Europe. And I am wondering if you 
expect the trend in unilateral digital services taxes to worsen 
due to additional revenue shortfalls resulting from the COVID-
19 pandemic. Are we going to see more of this?
    Ambassador Lighthizer. I think we are going to see more of 
it for sure. Whether it is a result of the COVID, I think they 
were going to do it anyway. I think it is a natural inclination 
to tax somebody else's citizens if you can do it, because there 
is no political price for it.
    And we have seen it. We just brought 12 more cases, and we 
are going to continue to bring them as people do it, and we are 
going to take action if there is not some agreement 
internationally that says, here is how we are going to treat 
companies that make money in your market but do not have a 
physical presence.
    Senator Thune. And I appreciate all the things your office 
has done to launch section 301 investigations into those taxes 
earlier this month.
    In your testimony, you suggest that the way to strengthen 
our existing trade policies to better protect Americans is to 
tighten de minimis thresholds for imports. And last year, 
during a USMCA hearing before this committee, we heard from a 
small business owner who said that the de minimis level helped 
her grow her business. Rather than hurt small businesses like 
hers, I would suggest another option you have to strengthen de 
minimis is to negotiate agreements that increase our 
negotiating partners' de minimis thresholds. And based on your 
testimony, it appears that you will have some upcoming 
opportunities to pursue this other option. And I will add, 
Congress will be very likely to support you in that effort.
    So do you agree with me that there are multiple ways of 
addressing your concerns related to de minimis?
    Ambassador Lighthizer. So, for sure I agree with that. We 
tried to do it in USMCA. We are at $800. These are approximate: 
Mexico is at $20, and Canada is at $40, and they doubled 
theirs. And to me, there may be small businesses--I think we 
need to study the issue, to be honest. If you look at where 
countries are, it is unbelievable the difference. We are like, 
other than Australia, we are much higher than everyone else; we 
are 20, 50 times more.
    I would like to study the issue and have the committee--I 
think it is costing far more jobs than it is helping. And I 
think nobody anticipated that, as a result of this, we would 
have a million packages a day from China take advantage of this 
$800--a million a day.
    The numbers are staggering. It is 600--depending on how you 
count--700 million packages a year come into the United States 
taking advantage of this. We do not know what is in part of 
them. We do not have any way of checking. They basically avoid 
Customs. To me, it is a real, real problem.
    And I think--if you ask me why every other country keeps it 
small, it is because their small retailers realize that these 
online people will put them out of business if they raise it.
    So I have exactly the opposite view. I would really love to 
get involved in this with the committee and have the committee 
study what the facts on the ground are.
    Senator Thune. We welcome that opportunity. I see my time 
has expired, Mr. Chairman. Thank you.
    The Chairman. Thank you. Now we will have three people by 
TV in this order: Portman, Menendez, and Toomey. And as I said 
to Senator Stabenow by TV, evidently you folks do not have the 
timer in front of you. So expect at 5 minutes, or until you get 
done with your question at 5 minutes and the answer, I will rap 
the gavel and go on to the next person.
    Senator Portman?
    [No response.]
    The Chairman. Senator Portman?
    [No response.]
    The Chairman. Okay. Then how about Senator Menendez?
    [No response.]
    The Chairman. Okay, then; what about Senator Toomey?
    [No response.]
    The Chairman. Well, we'll have Mr. Carper in person.
    Ambassador Lighthizer. Well, we have Senator Menendez.
    The Chairman. Oh, Senator Menendez, go ahead, please.
    Senator Menendez. Thank you.
    Ambassador, were you in a meeting between President Trump 
and Chinese President Xi in June of 2019 in Japan?
    The Chairman. I think you have to start over again, Mr. 
Menendez. We did not get your voice at the beginning.
    Senator Menendez. Okay. Can you hear me now?
    The Chairman. Start your 5 minutes over again.
    Senator Portman. Did you tell him that I was on, and that 
they did not----
    The Chairman. Well then, Portman, you are ahead of 
Menendez. I am sorry for something not working right. You go 
ahead, Senator Portman. Then Menendez, and then Toomey.
    Senator Portman. Okay, can you hear me, Mr. Chairman?
    The Chairman. Yes.
    Senator Portman. Okay. I am sorry; there was some reason 
you could not hear me. And I could not hear Bob part of the 
time either.
    Anyway, one, I want to tell you the clock is in front of 
us, and we can all see it. So other members were just using 
that as an excuse to go long; I will try not to do that.
    Two, thanks to Bob Lighthizer for being before us again. 
And there are so many issues I want to talk to him about, but 
let me just touch on a couple quickly.
    One, I know how interested you are in bringing PPE, 
personal protective equipment, back to the United States and 
reshoring it. And I would just tell you--this may not be 
exactly within your bailiwick, but I hope you will engage on 
this, because we are not going to get things made here, 
including immediately we are trying to get gowns and textiles 
made here. Those cannot be made here without long-term 
contracts. And DLA, the Defense Logistics Agency, the folks at 
DoD who are in charge of this, are not providing these long-
term contracts. So I hope you will weigh in on that. To me that 
is a bigger issue than any other specific trade-related matter 
as it relates to this reshoring of our capability to make PPE.
    We have to have the market signals that come from longer-
term, certain contracts. No comment needed. I just hope you 
will weigh in.
    Kenya. It has not been talked about yet. I know that we 
have begun the process of looking at Kenya as a potential 
trading partner. If you could, give us a brief summary of where 
we are in Kenya.
    In the UK, it sounds like we had a good first and second 
round. I want to be sure that is going to be a comprehensive 
agreement. And I know there is concern about us cutting some 
corners there. I want you to reassure us on that. I know how 
you feel about it.
    And then finally, WTO. I have some questions about WTO, but 
I will ask you to weigh in on Kenya and the UK first.
    Ambassador Lighthizer. Thank you, Senator. And I will 
follow up on the other.
    With respect to Kenya, we are going to launch that on, I 
think it is the 5th or 6th of July. That will be the beginning 
of that. We have had preliminary discussions, and we expect 
that to be as ambitious an FTA as you would have under the 
circumstances with a country with their level of institutional 
development. So we are excited about that, and I know the 
Kenyans are excited about it. And I know that President 
Kenyatta's hope is that we can get this done in enough time so 
it comes in under his term. So that is where we are on that.
    On the UK, yes, as far as I am concerned, it is a 
comprehensive agreement. I do not know if there is a specific 
provision that you think we would not cover, but I would expect 
it to be a comprehensive agreement. And it is going to cover 
industry, but of course agriculture. When I say 
``comprehensive,'' that is not to say I am suggesting going to 
zero on every tariff. But I expect we should cover every 
sector.
    Senator Portman. Okay. With regard to WTO, as you know, we 
share an interest in reform of the WTO. I would love to have a 
discussion about what that means for this administration.
    One of my big concerns, which I know you share, is how the 
Appellate Body has treated us and, frankly, how the Appellate 
Body has broken down. I also like the fact that you are doing 
trilateral work with the EU and with Japan on subsidies, 
particularly state-owned enterprises. It seems to me that is an 
opportunity for us to bring other parties together, with the 
exception perhaps of China, to come up with some new rules.
    And then finally, what is the future of bound rates? We 
have relatively low rates that are bound. Other countries have 
relatively higher rates. That has been good for us in many 
respects, but it does make it hard for us to negotiate 
agreements sometimes because we do not have as much play in 
terms of our tariffs as other countries do.
    Could you address those WTO issues briefly and tell us 
where we are in terms of WTO reform, and what Congress could 
do? I am looking at some legislation about what Congress could 
do to be helpful in making the WTO work more effectively for 
the United States and for the world.
    Ambassador Lighthizer. So thank you, Senator. To me, I 
would say that the WTO is in desperate need of reform. If you 
asked what are my criticisms, number one is what you just said. 
And that is to say, we negotiate tariffs and then they are 
bound. Let me give you an idea.
    So, if you take our average tariff on non-agricultural 
products, that is like 3.2 percent. India's is 34 percent. 
Indonesia's is 35. Malaysia's is 15. Vietnam's is 11. Europe is 
slightly above ours. South Korea is at 10. And I could go 
through this and this and this. Their applied tariffs are 
higher, but more importantly their bound tariffs are much, much 
higher. And because we have essentially no tariffs left, there 
is no way for us to change that.
    So we are kind of locked in perpetuity into an unfair, 
unbalanced situation. I think that something has to be done to 
change that so we do a reset on tariffs and everybody comes 
down to the same tariffs.
    Senator Portman. I like the idea of everybody coming down. 
I do not like the idea of everybody going up.
    Ambassador Lighthizer. Well, maybe we will have to meet in 
the middle; I do not know. But we cannot be locked into this 
position. And in the past, the negotiations have basically 
been--the currency has been that the U.S. has paid everyone to 
lower theirs a little bit, and we have lowered ours a lot.
    And just very briefly on the Appellate Body: the biggest 
single problem there is that you have a group of unelected, 
unaccountable people who make jurisprudence, which 
jurisprudence then binds the United States, effects our jobs 
and businesses, our farmers and our ranchers, and there is 
nothing that we can do about it.
    It is a screwball system where you have these people doing 
what they were never intended to do--and that is to say, write 
rules. And that is a large part of the reason why we have had 
no negotiations in the last 25 years, no real negotiations in 
the last 20 to 25 years. I could go on, but I will not.
    Senator Portman. Thank you, Mr. Chairman. And let us talk 
about WTO reform going forward, Ambassador Lighthizer, and with 
Congress. That would be helpful.
    The Chairman. Your time is up. Okay, Senator Menendez.
    Senator Menendez. Ambassador, were you in the meeting 
between President Trump and Chinese President Xi in June of 
2019 in Japan?
    Ambassador Lighthizer. I do not remember----
    Senator Menendez. I cannot hear you.
    Ambassador Lighthizer. I am sorry, Senator; you could not 
hear me because I did not have my microphone on. There was a 
meeting on the outskirts of the G20 in Osaka between the 
President and President Xi, and I was in that meeting. I do not 
know whether that is the one you are referring to, but that is 
the situation.
    Senator Menendez. Well, the reason I ask is, about an hour 
ago The Washington Post published a story that says former 
National Security Advisor Bolton said that at one point in that 
meeting President Trump, quote, ``turned the conversation into 
the coming U.S. presidential election, alluding to China's 
economic capability to effect the ongoing campaigns, pleading 
with Xi to ensure he would win.'' That is the end of the quote.
    Ambassador Lighthizer. Absolutely untrue. Never happened. I 
was there. I have no recollection of that ever happening. I do 
not believe it is true. I do not believe it ever happened.
    Senator Menendez. Okay, so now you fully recollect that you 
were there?
    Ambassador Lighthizer. No, I was at the meeting. Would I 
recollect something as crazy as that? Of course I would 
recollect it. I was at the meeting----
    Senator Menendez. You were not sure at the beginning that 
you were at the meeting. Now that I know you were at the 
meeting, you in essence dispute Mr. Bolton's account of what 
took place, right?
    Ambassador Lighthizer. I told--yes, that is correct. I 
mean, I--I do not want you to create the impression that I am 
being deceptive. I said what meeting I was at, and this never 
happened in it, for sure. Completely crazy.
    Senator Menendez. Okay, I assume it is the same meeting. 
And if it is not, we will find out. Because if it is true, it 
shows how clear it is that the administration does not really 
have any intention of actually solving our trade problems with 
China.
    The tariffs remain in place because China still has not 
dismantled all the capacity. It has not stopped stealing 
American intellectual property. It has not stopped subsidizing 
its own state industries. And so this would be a really 
outrageous use of presidential power, instead of trying to 
solve our trade problems.
    Let me turn to something else. Shortly after Congress 
approved the USMCA, Mexico's television regulator issued a new 
interpretation that severely limits the amount of advertising 
U.S. media firms can show on their paid TV channels in the 
country. The U.S. industry argues that this action 
discriminates against U.S. TV providers in violation of USMCA 
and will undercut U.S. jobs that support their programming in 
Mexico.
    Ambassador, would Mexico be in compliance with its USMCA 
obligations if this regulation is not modified by July the 1st?
    Ambassador Lighthizer. So I would say, I am aware of this 
issue. I want to study it. But if you want an answer right now, 
I would say ``no,'' it would not be in compliance. That is my 
opinion right now. And I want to study it, but I completely 
agree with you, Senator.
    Senator Menendez. And I agree with you on that. Because the 
USTR viewed this as a violation of NAFTA 6 years ago and 
successfully resolved it until this latest change, so we are 
going to start off on July 1st with Mexico being out of 
compliance from the very start. That seems like a horrible way 
to kick off a new agreement.
    I hope that--can you commit to us that you will review this 
and make sure that Mexico is in full compliance with its 
obligations, assuming that it is the same view USTR had 6 years 
ago?
    Ambassador Lighthizer. Absolutely. And if they are not, we 
will bring a case against them, Senator. Yes, I will commit to 
that.
    Senator Menendez. Thank you for that answer. I appreciate 
that.
    On Sunday we heard troubling reports that two USTR 
employees who had been intimately involved in negotiating USMCA 
had approached companies, offering to serve as paid advisors. 
Apparently these employees were looking to cash in on helping 
companies navigate USMCA's complex rules, rules that these 
employees helped draft. And they even tried to steer companies 
to a website that they had set up for their future lobbying 
firm.
    Do you know if USTR's ethics office told these employees 
that they could approach companies for future lobbying work 
while still on the government payroll?
    Ambassador Lighthizer. So--so I read that story, also, 
Senator. So I would say the situation is this. One, they are 
career employees. Two, they went through the ethics office at 
USTR. And three, I am told that career employees, as opposed to 
political employees, can do things like this.
    So I am as troubled by it as you are.
    Senator Menendez. Okay. I appreciate that, because I think 
we should have a very clear understanding of what is and is not 
acceptable. And I do not care whether you are career or 
political, it seems to me that if you negotiate elements of an 
agreement, in this case in the automotive industry, and then 
while you are still on the government payroll you set up a 
website and you pursue your own interest, that is the ultimate 
essence of the revolving door. That is not what makes people 
have faith and confidence in their government.
    I hope you will look at the internal questions and whether 
that can happen or not, and I would like to follow up with you.
    Ambassador Lighthizer. I want to follow up. I completely 
agree with you--completely.
    Senator Menendez. Thank you.
    The Chairman. Okay; before I go to Senator Toomey, Senator 
Wyden has a request he wants to make.
    Senator Wyden. It is a unanimous consent request. And when 
I was done, Mr. Ambassador, I saw the same Washington Post 
story that Senator Menendez referred to, and I heard your 
response. These are obviously very disturbing allegations.
    My unanimous consent request is, given the fact that The 
Post is suggesting in effect that Donald Trump offered trade 
concessions to China for trade benefits for electorally 
important States, I would just like to--I will be sending you a 
list of written questions, and I would like a response to the 
written questions within a week. That is my announcement.
    The Chairman. Is there any objection?
    [No response.]
    The Chairman. So ordered.
    [The questions appear in the appendix.]
    Senator Wyden. Is that acceptable to you, Mr. Ambassador?
    Ambassador Lighthizer. I do not know--I will see the 
questions. About the week--I will be happy to answer questions. 
The timing, I will look and see what your questions are.
    Senator Wyden. They are going to refer to this that broke 
in the paper. There are allegations--and I want to emphasize 
that--but I would like a response within a week, and we will 
talk about it further.
    Thank you, Mr. Chairman.
    The Chairman. Now we go to Senator Toomey, by TV.
    Senator Toomey. Thank you, Mr. Chairman. Ambassador 
Lighthizer, good to see you again. Welcome.
    I am going to start with something on which I think you and 
I agree, and that is that prior to the arrival of the COVID 
virus, for several years our economy was remarkably strong, 
really across the board, setting very strong performance 
records for the last several years.
    Where we may not agree, based on the testimony, your 
testimony I read, I would argue the strength of our economy was 
not because of tariffs. In fact, the strength of our economy 
was because, for the most part, we have had the freest trading 
environment in 100 years. And under that global free trade, 
certainly much more so than in recent decades, that has enabled 
us to prosper. In fact, it was the steel and aluminum tariffs 
and the trade war with China which began the deceleration of 
what had been extremely strong growth.
    And I have to point out the unintended consequences of 
these tariffs. You know, in my State of Pennsylvania, we have 
fewer manufacturing jobs today than we did 3 years ago. We have 
lost manufacturing jobs. And we have lost a number of them in 
steel and aluminum industries because far more people are in 
the business of using steel and aluminum to produce things than 
the people who actually make steel and aluminum.
    And so when tariffs raise the cost of the steel and 
aluminum, those are higher cost inputs for those manufacturers 
who then are less able to compete with foreign companies that 
are not subject to those taxes. So imposing those taxes on 
American consumers and manufacturers generally makes us less 
competitive, not more competitive.
    I have a point I would like to make on PPE. And that is, I 
read your comment from earlier today in which you seemed to 
suggest that you might support higher tariffs rather than lower 
tariffs on PPE in this notion that that might encourage 
domestic manufacturing.
    I would just urge you to consider, as I think Senator 
Cantwell did, that right now we are in a desperate crisis still 
for PPE. We have shortages in Pennsylvania, and probably other 
places, and it is not helpful to our hospitals, nursing homes, 
and other health-care providers to have to pay more for this 
than is necessary.
    And what we really need in the long run is diversified 
sources. We should not be dependent on any one source for PPE, 
not any one country, not any one manufacturing facility. But if 
we have lots of sources, including many that can gear up in a 
hurry, then that is probably the optimal arrangement.
    The direct question I have for you is, I would like to get 
a little bit better understanding of your plans and your goals 
with the U.S.-UK free trade agreement, which as you know I am 
enthusiastic about. I would like to better understand what your 
goal is, what you would like to see, what would be the ideal 
arrangement. I think I heard you say to Senator Portman that we 
are not likely to get to zero tariffs on everything, and I 
wonder, is that just a practical reality given the inevitable 
reluctance on the part of the UK to give up tariffs on certain 
things? Or do you go in with a goal of not having zero tariffs 
on certain things? And if so, which are those things?
    I would just like to get a better understanding of how you 
are approaching this agreement and what you would like to get 
out of it.
    Ambassador Lighthizer. Thank you, Senator.
    So first of all, the issue on which we agree. We clearly, 
demonstrably had the best economy in decades before this 
pandemic. I think revisionists' views that that was not the 
case are not supported by any fact of which I am aware.
    Secondly, I think that a contributor to that was the 
President's trade policy. I realize you do not agree with that.
    I would point out that before the pandemic, we had brought 
back more than 600,000 manufacturing jobs--``we'' being the 
President and the President's policy had brought back more than 
600,000 manufacturing jobs. And I think you are going to see 
more coming back very, very quickly once we get past this 
pandemic.
    On the issue of 232, I take your point. I appreciate it. I 
would say that with the situation we have now, it scares me to 
think what condition our steel and aluminum industry would be 
in without those 232 tariffs. It is scary to think about.
    When I talked about tariffs on PPE in my testimony this 
morning, to clarify, what I meant was down the road as an 
incentive to get there. I am not talking about doing it now, 
just so that is clear. And I know you understand that.
    This idea of diverse sources for PPE, I would just point 
out that something like 50 or 60 countries took action to stop 
exports, in spite of their obligations, of PPE because, when 
they are in a situation where their citizens are going to 
suffer if they ship something out, they just do not ship it 
out. And it is a universal trend. So I really think we have to 
make it in America. But I realize you have a different view on 
that.
    So in terms of the goal on the U.S.-UK, from our point of 
view we want an agreement that goes across all sectors that is 
as high a standard as one could have. Do I think we will go to 
zero tariffs? No, I do not. And will I support zero tariffs in 
all areas? No, I will not, either. And for example, I think we 
are going to find agricultural areas--and there are sensitive 
areas in both our economies--where the secret is to have as 
much be open and free as we can, given the political 
circumstances in each country. And I think that a lot of the 
fight is going to be over SPS issues and things like that, the 
kinds of stuff where you and I completely agree.
    Senator Toomey. I see my time has expired. Thanks, Mr. 
Chairman.
    The Chairman. I apologize to my colleagues. I did not 
realize his time had expired.
    Senator Carper?
    Senator Carper. That is quite all right.
    Mr. Ambassador, welcome. It is always good to see you and 
to work with you and members of your staff.
    I just want to start off by thanking you and members of 
your team. We met recently with a nominee by the President to 
be one of your two deputies at the Trade Rep's office, and I 
had a good conversation and was encouraged by that.
    But I want to start off by thanking your team for your hard 
work on the U.S.-UK trade negotiations. As you know, opening up 
the UK market for U.S. poultry is a priority for a number of 
us, not just on this panel but in the House and in the Senate, 
and we think it is important to seize the opportunity to open 
the UK market to our poultry farmers throughout the country. So 
thank you for that.
    I will probably go to my grave on an issue we do not see 
eye to eye on, and I will probably go to my grave thinking that 
we made a big mistake in pulling out of the Trans-Pacific 
Partnership. The idea of having the U.S. as one of 12 nations 
together encompassing about 40 percent of the world's trade, 
and holding China outside of it because of their bad behavior 
on any number of fronts regarding trade and even encroachments 
in the South China Sea, demilitarizing the South China Sea--for 
us to walk away from that, I will go to my grave wondering why 
we did that. That is a story for another day.
    Having said that, I would like to ask a question relating 
to cost/benefit analysis with respect to China. Studies by 
multiple Federal Reserve economists and notable academics have 
found that American businesses and consumers bear the brunt of 
the Trump administration's trade war with China. Our farmers, 
our manufacturers in particular, have been hit hard throughout 
the country. These tariffs were supposed to force China to make 
structural changes, as you will recall, to its planned economy. 
The issues outlined in the USTR's section 301 report included 
China's government subsidies, state-owned enterprises, 
technology transfers, among many others.
    But as it turns out, the best I can tell, none of these 
truly tough issues was addressed in the Phase One trade deal. I 
know there is a technology transfer section, but the half-page 
of text includes no specifics. And according to people who have 
read it more closely than I have, it is pretty toothless.
    Again, I appreciate how hard you and your team worked, but 
I ask myself, is the Phase One trade deal worth all of this 
pain that our farmers and manufacturers have gone through, and 
in many cases are still going through today? That would be my 
first question, and I will have a follow-up.
    Ambassador Lighthizer. Thank you, Senator. And thank you 
for meeting with my people. And they also enjoyed the meeting. 
And, you know----
    Senator Carper. I told your nominee at the end of just a 
wonderful meeting how much I had enjoyed it. I said, ``I will 
never vote for you''--no, I did not say that. [Laughter.]
    Ambassador Lighthizer. Well, I will not go into the 
details, but he enjoyed the meeting. He thought you were very 
thoughtful, and it gave him a lot of things to think about. So 
I--but he did single that out, and I told him that----
    Senator Carper. Did you tell him I must have been having a 
good day? [Laughter.]
    Ambassador Lighthizer. No; I told him you were a wonderful 
person. And I told him that you had probably forgotten this, 
that you flew in Vietnam with a college buddy of mine, Bobby 
Francis.
    Senator Carper. Oh, yes.
    Ambassador Lighthizer. I told him that.
    Senator Carper. He and I were just communicating a week 
ago.
    Ambassador Lighthizer. Yes, you guys were up there doing 
the Lord's work and serving the country so bravely during that 
time.
    So just on a couple of things: one, one of the things on 
the UK on poultry is going to be this rinse on poultry, this 
so-called ``chlorinated chicken,'' with these people. It is 
going to be a huge problem, and I have made it clear that this 
is not going to be an agreement--I am not bringing back an 
agreement to the U.S. Congress that excludes our agricultural 
products on a non-scientific basis.
    Senator Carper. Thank you, very much.
    Ambassador Lighthizer. So, on the TPP, I realize you will 
go to the grave thinking that--I hope it is not soon--and I 
would just point out that the nub of your argument is, we were 
going to have 12 countries that were going to keep China out, 
and we were going to have this group. China now says they are 
probably going go join it.
    So just remember, when you and I spoke about this 2\1/2\ 
years ago in your office, I said, ``What happens if China joins 
it?'' And the whole thing does not have any meaning if they do. 
And they are talking about maybe doing it.
    Senator Carper. I am not so sure we would sit by idly and 
say, ``Well, you guys are welcome in even though you are doing 
all this bad behavior.'' Well, let us just move on, okay, 
please?
    Ambassador Lighthizer. So----
    Senator Carper. I want to go to----
    Ambassador Lighthizer. Now that we are on China, I would 
say first of all, I do not know what studies you are referring 
to. There are these studies that say anything you do on tariffs 
is bad, and they give no benefit in their cost/benefit analysis 
to changed bad behavior. So if you are an economist and you 
start with the proposition that Chinese theft of technology, 
and of IP, and keeping our financial services out, and currency 
manipulation and the like are not bad things, then you are 
going to conclude that doing anything to stop them is a waste.
    That is how I think they approach it. The reality is, if 
you change bad behavior, that has real economic benefit for the 
United States. That is the nature behind this agreement. It is 
the nature behind most of our trade agreements.
    And this thing that is toothless, I have all these people--
and I would not put you in this category--but I have all these 
people whom I talk to about it, and I say, ``Have you read it? 
Have you looked at it? Have you at least paged through it?''
    So on the issue of technology, Senator, it flat says that 
you are not allowed to use technology transfer to require any 
person to get a license, to have a joint venture, to have an 
acquisition, and it goes through it in the clearest possible 
language.
    And I will take a step back and say what I said before. All 
these critics, nobody did anything in the face of this horrible 
situation for 25 years--Democrat, Republican, Democrat. And 
President Trump comes along and people say, ``Well, that is not 
perfect.'' And my reaction is, ``Lord, nobody did anything in 
the face of this.''
    But I really, really do, Senator, commend you to read this 
document. This document is real. And I can take you through--
not now, because I have already taken up too much time--but I 
would like to walk you through some of the things that they 
have done in the structural thing. You know, forgetting this 
issue of purchasing, just in the structural thing I think you 
would be impressed, particularly about things you care about 
like financial services.
    They have done a lot of stuff. They have gotten rid of 
equity caps, and they have just done a whole lot of licensing 
like American Express. And so I would like to kind of walk you 
through--not here--but just kind of take you through so you can 
see that the critics who say that this is not a real agreement 
are just not being fair.
    The Chairman. Senator Scott, by TV.
    Senator Scott. Thank you, sir. Good afternoon to everyone. 
Thank you for giving us an opportunity to continue the 
discussion that we have been having with the Ambassador.
    Ambassador, thank you for joining us this afternoon. I know 
that there are a lot of critical issues that you face and lots 
of problems that you are trying to solve. I am going to add a 
couple more to your plate.
    South Carolina is home to many farmers who make the 
Southeast an agricultural hub, like our famous South Carolina 
peaches. Unfortunately, the increasing imports from Mexico are 
imposing serious economic harm on producers in my State and, 
frankly, around the country. I am hearing from constituents who 
lost millions of dollars last year alone.
    In January, you sent Congress a letter on steps you would 
take to confront trade-distorting practices that are unfairly 
distorting agricultural prices here in the U.S. Do you have an 
update on those commitments that you were talking about--number 
one. Number two, are you still on track to release a remedy 
plan by August, which is within the 60-day window of the 
USMCA's entry into force?
    Ambassador Lighthizer. So, thank you, Senator, for the 
question and for all that you do for all of us. I appreciate 
that, and I have enjoyed working with you. I have watched what 
you were doing recently, and I want to just show gratitude for 
that.
    The issue of seasonal fruits and vegetables is something 
that is a very serious issue. What we have committed to do is, 
one, have live field hearings in two States. It is going to be 
in Georgia, and it is going to be in Florida, and we were going 
back and forth on live or virtual--we are going to have it 
live, if members decide it is safe. And we are in the process 
of doing that. But it would have happened by now. We had 
noticed them, as you probably know, and then this close-down 
came. But I still think we are better off having real, live, 
safely done hearings. So we are doing that.
    And do I expect to have our plan out in 60 days? Yes, I do 
expect to have our plan out in 60 days. And I really would like 
to work with you and your staff on putting that together, 
because it is a very, very serious problem, and it is in at 
least four or five States where it is having a huge impact, and 
it is billions of dollars of sales.
    Senator Scott. Well, thank you. I will say, Ambassador, 
sometimes you and I have not agreed on all the issues. You have 
always been a person of your word, and I truly appreciate you 
meeting that deadline and frankly, continuing the dialogue and 
helping me better represent the State of South Carolina.
    As you know, the farmers in South Carolina and, frankly, 
around the country, are having a harder time because of the 
pandemic. And so this situation is always encouraging when we 
hear steps in the right direction.
    The second issue really has to do with the automotive 
industry. Do you support my legislation to provide an MPF fixed 
to the USMCA?
    Ambassador Lighthizer. I do not know what it is.
    Senator Scott. It is aligning the merchandise processing 
fee refund with all of our FTAs.
    Ambassador Lighthizer. So, some of these issues I hook in a 
different way. The answer is, ``yes,'' we support your 
legislation.
    Senator Scott. Okay, great. Finally, transparency is 
important, especially with how dramatically we have changed the 
auto rules. Will USTR create a formal mechanism for the 
automotive industry to consult with USTR as the implementation 
of the USMCA proceeds?
    Ambassador Lighthizer. Interesting. I had not thought of 
that idea. And if you and the members of the committee think it 
is a good idea, we will do it, yes.
    Senator Scott. We certainly would love that. Thank God for 
really smart staff members who have been working on your team 
and my team. So it helps to have a great team.
    Ambassador Lighthizer. I agree with that. I know I would be 
nowhere without mine.
    Senator Scott. Me and you both. Thank God for Lila. Thank 
you, sir.
    Ambassador Lighthizer. Thank you, Senator.
    Senator Scott. Yes, sir.
    The Chairman. Senator Cardin?
    Senator Cardin. It is Ben Cardin. Can I be heard? I hope I 
can be heard. I cannot hear back.
    Anyway, Ambassador Lighthizer, thank you very much for your 
service. I appreciate all the help you have given my staff. I 
just first want to underscore Senator Carper's point in regards 
to poultry in the UK agreement. There is a great deal of 
interest to make sure that we make advancements in that regard. 
So I assure you, you will be hearing from a group of Senators 
in regards to that issue.
    I want to get a little bit more on Kenya. Kenya presents 
unique challenges for a trade agreement with the United States. 
You are committed to deal with good governance. You did that in 
the USMCA. If you use the model of the USMCA, it is going to be 
a real challenge to see how Kenya complies with those types of 
commitments on governance.
    Can you just share with me how you are going to go about 
the discussion on good governance and how we can help you in 
order to make sure that we have the strongest possible 
provisions as it relates to those issues?
    Ambassador Lighthizer. So, thank you, Senator. And I 
appreciate your comments on poultry, and I know how strongly 
you feel on that issue, and I assure you that it will be a 
cutting-edge issue, and I agree with you completely.
    So, on the issue of governance, one of our objectives with 
Kenya is to start a process where countries in Africa begin to 
put in place something closer to what we consider to be the 
infrastructure, the legal and regulatory infrastructure, to 
facilitate international trade and what we consider to be kind 
of best practices in the governance and the corruption area.
    I think, as you are suggesting, this is going to be a very 
difficult issue with respect to Kenya. The first thing you 
need, though, which we have here, is commitment at the highest 
level. And we do have that. And that is one of the reasons why 
we selected Kenya from among the countries that were interested 
in doing this.
    You have to have commitment at the highest level. We 
believe that we do have that. I think it is going to require 
some modification, some realism, and some phase-in. And all of 
those things I would like to work with you on, because I know 
this is one of the areas--I do not think I have ever had a 
hearing with you, or very many conversations outside the 
hearing, where you did not raise these all-important issues. 
And they really are important.
    And one of the reasons that we want to enter into this 
agreement and then have it be a model for other agreements in 
sub-Saharan Africa, is so that we can put in place the kind of 
structure that we need for good governance or best practices 
governance.
    So I want to work with you on that. I understand it is a--I 
agree with you about the importance, and it is something you 
have focused on, literally your entire career in government. It 
is very much at the focus of what we are trying to do there.
    Senator Cardin. I can assure you that I enjoy working with 
your staff on this issue. I think the more transparency you do 
with Congress as it relates to these provisions, the stronger 
support you can get on the understanding that you are trying to 
drive this agreement as a model for other agreements of 
similarly situated countries. So we look forward to that 
discussion.
    I want to just raise a second issue with the USMCA. There 
is a chapter dealing with small business. I am the ranking 
Democrat on the Small Business Committee. COVID-19 has led to 
havoc with all businesses, but small businesses particularly 
have been very harshly hit.
    I know that you have had a working group. I know that you 
have had dialogue. Are we on schedule to have a meaningful 
implementation of the small business provisions of the USMCA?
    Ambassador Lighthizer. The answer is ``yes,'' we expect 
that we will. We have had good cooperation with both Mexico and 
Canada on that. And I think we are going to have issues, but I 
do not think we are going to have issues in that way, in that 
area.
    Now I may be proven wrong. And if I am proven wrong, we are 
going to take the necessary steps to make sure that the 
agreement is lived up to. But right now we feel very good about 
that. And this area is something that both Prime Minister 
Trudeau and President Lopez Obrador also feel very strongly 
about. So you have the President of the United States, the 
President of Mexico, and the Prime Minister of Canada all very 
much in agreement on the importance of small business. So I 
expect this to go smoothly.
    If it does not, then we will take steps to enforce. And I 
certainly look forward to working with you on that, in the 
unlikely event that that happens.
    Senator Cardin. You just have to keep our committee, the 
Small Business Committee, informed as to how that chapter is 
unfolding, because there is great interest amoung members of 
our committee.
    Thank you, Mr. Chairman.
    Ambassador Lighthizer. Thank you, Senator.
    The Chairman. You bet. Thank you, Senator Cardin.
    Senator Young was going to be here in person. Is he on TV, 
or should I--okay, then the next one is, by TV, Senator Bennet.
    Senator Bennet. Thank you, Mr. Chairman. Can you hear me?
    The Chairman. Yes, I can hear you.
    Senator Bennet. Thank you so much for conducting this 
hearing, and for having all of us under these circumstances. 
Mr. Ambassador, it is good to see you again, even if it is 
virtual. And I hope you and your family are doing well.
    I want to ask you about agriculture, which I almost always 
do, after the conversation we had some months ago about the 
cross hairs farmers and ranchers were put in because of 
retaliatory tariffs. And once again, to me it just feels like 
they are trapped, our farmers and ranchers are trapped between 
a rock and a hard place with China. According to, at least the 
Farm Bureau and I think USDA, Chinese agricultural purchases 
are off-base to commitments made in the Phase One deal by as 
much as 60 percent.
    I know you dispute those numbers, but that is what we are 
hearing from our farmers and ranchers. That is what we are 
hearing from the Farm Bureau and USDA. I would be interested to 
hear your thoughts about why you dispute that, because of their 
sense that China is not living up to the deal. This week, a 
coalition of farm and ag groups asked the administration to 
stick with the China deal and make sure China holds up its end 
of the bargain.
    So I am really interested in how you expect to hold China 
accountable without further sacrificing our agricultural market 
if China fails to fulfill their agricultural obligations. And 
if they do, how will we know? And will you be transparent about 
it with the American people? And how are you going to enforce 
the terms of this agreement in a way that does not boomerang on 
our farmers? And how quickly do you think our farmers and 
ranchers could expect the remedy if you decide that China is 
not complying with the terms of the deal?
    Ambassador Lighthizer. Thank you. Thank you, Senator. I 
appreciate the question. I would say, first of all, that the 
numbers in this--I went through this before; I will go through 
it very quickly. I went through it with Senator Cantwell, so I 
will go through it quickly. The numbers are difficult to 
calculate. The reason is, you have export shipments, but export 
shipments will not pick up things that have been purchased by 
now for at least--it depends on the product--but you can assume 
a minimum of 6 weeks, and sometimes much longer than that.
    So what we have tried to do is put together numbers that 
are the following. One, export numbers, which we have pretty 
good numbers on. And then we take the sales reports, and we add 
to that, making sure we do not double-count; we add to that 
sales up till now. And then you are only like a week or so 
behind, as opposed to if you take exit numbers, where you are 
6, 8, 10 weeks behind and you really do not have any idea what 
goes on. So that is the first point I would make.
    The second point is, let us remember the agreement was 
signed on the 15th of January and went into effect on the 14th 
of February. And it was about March 1st when they started 
granting the exclusions and giving the licenses and the kinds 
of things we need.
    So I would say those things. The next thing is, the 200 
farm groups and farm organizations that sent a letter to the 
President really were all saying, ``This is really a great 
agreement. Let us stick with it.'' So I took that as a very 
positive letter. I think it was meant to be a positive letter. 
And I thought it was very complimentary of the President and 
the deal. And so I get criticism of the deal----
    Senator Bennet. Well, I think they said--and I quoted the 
letter saying that they wanted you to stick with the deal. My 
question is different from that. Let me ask it this way.
    When will you know--adding up the weeks that you are adding 
up--when will you know whether or not China is upholding their 
end of this bargain? How will you make that transparent to the 
American people? And what remedies are available to you if they 
do not--if, for example, the trends that the Farm Bureau is 
reporting continue to be the trends, rather than your more 
optimistic view?
    Ambassador Lighthizer. Right. So I would say it is 
enforceable. At some point in a few months we will know. It is 
a commitment to buy a certain amount by the end of the year. So 
at some point it is reasonable to say, ``It does not look like 
you are going to meet your deadlines.''
    Right now my feeling is, given the limited amount of time 
that has passed and the circumstances they have, I would say if 
you use our methodology--and I am not sure exactly which 
products you are most concerned about, presumably you care 
about--well, I should not speculate on it. If you look at 
oilseeds, soybeans, there have been substantial purchases up to 
and including $500 million last week.
    So those purchases are probably well north of $3 billion 
already. And you know that soybean season is really later on. 
So if you look at 2017--which was the biggest year we ever had 
with China--you had $10 billion at the end of the year.
    Another way to look at it is this way: in the last couple 
of months, increases of agricultural sales to China have gone 
up 34 percent, and the rest of the world has gone down 13 
percent. So I think we are seeing a real effort. You know, how 
much has been shipped by now sort of depends on what you are 
looking at. If you look at corn accumulated and compare it to--
I do not know if you can see this, Senator--but if you compare 
it to 2017, here is where we are now. Here is 2017, the best 
year we ever had.
    If you look at sorghum, here is another example. Wheat, we 
are ahead. Sorghum, we are way the devil ahead. Pork, we are 
just astronomically ahead of where we were. Of course you know 
there is a lot of reason for that. Beef, which I know you do 
care about, I mean, it is just literally--there was no beef in 
the best year ever, and now we are up. It is like our second 
best beef market right now. Cotton is the same thing. Those are 
the big products that are ahead.
    And the other thing I would ask you really to think about 
is, there also have been 25 or 30 SPS changes. And to the 
extent you want to go through these--I will not do it now, but 
I am happy to do it--there are changes where they have actually 
given licenses for products and allowed in certain agricultural 
products for the United States that they have never allowed in 
before, which were part of the agreement, and they have now 
formally done so.
    So I mean, I am not saying we are out of the water or 
anything like that. I am saying we have to keep on it. We have 
to keep looking at it. But it is certainly--if you had to bet 
right now, you would say they are going to do it.
    The Chairman. Senator Casey by TV.
    Senator Casey. Mr. Chairman, thank you very much for the 
hearing. Mr. Ambassador, it is good to be with you from a 
distance. We hope next time it is in a hearing room. Thank you 
for your work. And especially thank you for the work you have 
done on the USMCA and working as hard as you did to bring 
together the parties on that agreement.
    If you would indulge me a couple of minutes, I wanted to 
raise two issues with you that will take the form of bills, two 
of my bills, and then ask for your assessment of each, or at 
least your sense of where each policy is. One is on rules of 
origin. The other is on women's rights to trade. I will start 
with rules of origin.
    As we know, China often rides free on trade agreements, and 
as much as 70 percent of content can originate from China in 
goods that enter the U.S. under negotiated tariff rates for 
trade agreements. This issue was not resolved in USMCA. My 
bill, the Market Economy Sourcing Act, will establish a 
secondary rule of origin to prevent free-riding by China or 
other nonmarket economies.
    So I hope you would take a look at this in the context of 
considering it as an objective in the negotiations with the 
United Kingdom. And we should try our best, I think, to ensure 
that benefits are conferred on countries that respect market 
principles. So that is one issue. And I will ask you in a 
moment to comment on that.
    Then the second bill is on women's rights. Senator Cortez 
Masto and I have legislation to update GSP to incorporate 
measures on women's rights, nondiscrimination in the workplace 
as well, and both of us believe, as I think virtually everyone 
I know believes, that these are common-sense measures in trade. 
They should be a part of GSP. Any economy in the world, in my 
judgment, cannot develop fully or grow in the manner that it 
should if it does not recognize these rights and has denied 
equal rights and protections to literally half of that 
country's population. Nor should we allow discrimination 
against workers or fail to act to prevent violence and 
harassment in the workplace.
    I hope to be able to discuss both of these bills with you. 
But what is your sense of what progress we could make both on 
rules of origin and women's rights?
    Ambassador Lighthizer. Thank you, Senator. The rules of 
origin, you know--referring to both of them, I want to study 
the details of your bills. But certainly I agree with the 
intent on both of them.
    And the rules of origin on USMCA, we increased regional 
content, as you know. We increased regional content for parts 
in automobiles. We took a lot of steps in that direction. And a 
good part of the reason was--the whole reason was to stop free-
riders, but a good part of the reason was the specific free-
riders.
    And to go to Senator Carper's point, one of the reasons 
that I, for one, thought TPP was such a bad deal was because 
under those rules of origin, a car could be manufactured 60 
percent in China and 40 percent in Vietnam and still qualify. 
That is how bad the rules of origin were in that.
    So I agree completely with you about using rules of origin 
to make sure we get the appropriate outcomes. And the specifics 
of it, I would like to, of course, discuss. And in terms of 
including those concepts in the UK agreement, that is something 
we are interested in. Certainly, at least in the auto industry, 
the situation is very different than it was in North America, 
where it was kind of an integrated industry.
    But that is something I would be--I am not technically 
familiar with your women's rights issue and nondiscrimination. 
Certainly as a matter of principle, I agree with it. The 
President agrees with it. That is why he put Ivanka Trump in 
charge of really pursuing this issue, and this is something 
that she feels very strongly about.
    I want to look at it. It is timely. Obviously, the GSP 
expires at the end of the year and we have to decide now, or 
very soon, what we want to do on it. And I have a variety of--I 
have some problems that I have with it right now, to be honest 
with you. And this could very well be part of a solution.
    Senator Casey. Mr. Ambassador, thank you very much. Thank 
you, Mr. Chairman.
    The Chairman. Yes. Now we go to Senator Warner by TV.
    Senator Warner. Thank you, Mr. Chairman. Ambassador 
Lighthizer, it is great to see you again. Am I looking as foggy 
there to you guys as I look on my screen? I see Maggie saying 
``yes,'' so my apologies for looking--I am not quite this hazy, 
although when I raise my question, Ambassador Lighthizer, it 
may be intervention of the social media companies, because I 
actually want to talk about a subject we have talked about 
before, and that is section 230 reform.
    As we think about advancing the U.S.-UK free trade 
agreement, I have had a number of conversations with members of 
Parliament in both the Labor and Conservative parties in the UK 
who have expressed serious concerns about the potential 
inclusion of the 230 safe harbor in any type of U.S.-UK 
provision.
    I think, as you may be well-aware, there is a great deal of 
bipartisan interest in trying to change around a bit of section 
230, from both Democrats and Republicans in the House and the 
Senate. And let me be clear: I do not favor repeal of section 
230, which I understand President Trump recently advocated. And 
this is both for you, and obviously for Senator Wyden, who has 
been a great advocate for section 230: I think section 230, at 
least in theory, is great for startups. It is great in early 
stages of the development of these platforms. But I have been 
very concerned that, especially for some of the larger 
platforms, this provision and this safe harbor have been abused 
on a fairly regular basis.
    I have been joined in these efforts by a series of consumer 
protection groups, by a series of civil rights groups, that 
point out that section 230 has undermined a series of efforts 
to try to hold these platform companies accountable. Because 
too often groups come on, whether it is facilitating wage 
discrimination, whether it is facilitating consumer product 
abuse, whether it is taking on the challenge of actually 
targeted harassment, online fraud--a host of issues where I 
think there is meaningful 230 reform that could be done.
    So given this bipartisan, bicameral--even our colleagues in 
the UK from both political parties--and obviously the 
President's stated objection to section 230, can you describe 
USTR's status of negotiations on this issue with our UK 
friends?
    Ambassador Lighthizer. Yes; thank you, Senator.
    First of all, I want to say how disheartening it is to see 
the actual technology guy in the Senate have a foggy picture. 
[Laughter.]
    Senator Warner. You know, it may be one of the platform 
companies knowing I was going to raise 230, either that or Ron 
Wyden is actually zapping my feed. [Laughter.]
    Ambassador Lighthizer. So in any event, once I have gotten 
over that disappointment, I would say, first of all, we ought 
to take a step back and say, ``What do we do in trade 
agreements?'' I know you know this, but I will say it for the 
other members.
    I am not going to write 230, or a change in 230 into a 
trade agreement and then into U.S. law. What we do is, we take 
what we think of our U.S. standards that have been arrived at 
by the U.S. Congress, signed into law by the President at some 
point which we believe to be best practices--and we try to get 
other countries to put those into place. And then you say, 
``Well then, what do you do, Lighthizer, in a situation where 
there is an unsettled area?'' It had been settled. I do not 
know whether it is settled or not, but your point is a really 
good one, that there are certainly people who have a different 
view.
    What we try to do is write a trade agreement so that there 
is policy space in the trade agreement for the U.S. Congress to 
take action that they think is appropriate. And that is my job. 
My job is not to resolve this issue. That is between all of you 
who have been elected to office. I am trying to have our 
standards adopted and leave you space to do what you think 
needs to be done. And I think there is a sweet spot there. I 
think we can work that out. I am not that worried about it.
    In terms of where we are right now on the agreement, we 
have not tabled language on that area yet.
    Senator Warner. Well, Ambassador, I have only a minute or 
so left, but I would simply say I think there is a way that 
leaves Congress, leaves President Trump flexibility to put 
forward his position, does not totally embed a safe harbor that 
I think would embed the status quo, not give us the freedom and 
flexibility we need. And I would just appreciate--I know my 
staff has been working with yours on these consumer and civil 
rights protections, some of these provisions on online fraud, 
and some of the harassment issues that I think we all 
acknowledge are real and present, and I would just appreciate 
your staff continuing to work with us.
    I think we have had language go back and forth even after 
Memorial Day, so I appreciate that. And I look forward to 
working with you and hope the next time I see you it will be a 
little bit clearer, or potentially even in person.
    Ambassador Lighthizer. Great. Thank you, Senator. I look 
forward to that.
    The Chairman. Senator Hassan by TV.
    Senator Hassan. Well, thank you, Mr. Chairman. Thank you, 
Ranking Member Wyden. And, Ambassador, thank you for your work 
and bipartisan work----
    The Chairman. Senator Hassan, can I interrupt you? There is 
something with your--I do not know what it is, but you are 
coming through not clear. And it is not because you are not 
loud enough, it is something else wrong. Can it be fixed, or--
--
    Senator Hassan. Well, I do not know. It has been the same 
all week. We are trying to fix my speaker.
    Senator Warner. Mr. Chairman, this is probably the same 
group that went after me who are now going after Senator 
Hassan.
    The Chairman. It is working. Go ahead.
    Senator Hassan. This is working?
    The Chairman. Yes.
    Senator Hassan. Okay; good. Well, I wanted to thank you and 
the ranking member for holding this hearing, and I want to 
thank the Ambassador for strong bipartisan work in trying to 
improve our trade picture in the United States.
    But I do want to follow up, Mr. Ambassador, on the issue 
that a number of my colleagues have raised regarding the 
current supply of life-saving personal protective equipment as 
we continue to address the pandemic. And I want to emphasize 
that this is not just a matter of public and individual health, 
it is a matter of economic recovery. Businesses need this 
equipment to reopen. Schools and daycare centers, which will 
need to reopen if workers are going to be able to return to 
their jobs, need this equipment. And the cost of this equipment 
will be borne by America's taxpayers and consumers.
    So both supply and pricing are important. And let me be 
clear about what is happening on the ground. People do not have 
enough PPE. I just spoke with my nursing home administrators in 
New Hampshire at the end of last week. They are scrambling in a 
constant way to find enough PPE. The same can be true for 
daycare centers.
    And the administration finally produced data last week that 
shows that they do not have a plan for a sustained supply of 
all the personal protective equipment we will need for the long 
term, and that they are counting on requiring users to reuse 
some of the PPE in order to meet even minimal goals of supply.
    You mentioned that tariffs would help encourage domestic 
production. But I have to tell you--and I will echo Senator 
Toomey on this--all that tariffs do right now is make personal 
protective equipment more expensive for the many small 
businesses and hospitals and other users who will need ongoing 
supplies of it for months, if not years to come.
    And States getting PPE have had to rely on informal 
business connections, paying exorbitant prices to get even a 
portion of what they need. What would be better is to directly 
incentivize and support domestic production, as Senator Portman 
suggests, and do the long-term contracting as he suggested that 
will increase the supplies here at home.
    So to follow up on what Senator Portman asked you to do--he 
asked you to work with other agencies about the long-term 
contract issue. But I would like to take a step back. How does 
USTR coordinate with other agencies such as FEMA on efforts to 
increase the supply of PPE here at home and preserve the 
international supply chain? Have you been involved with FEMA's 
interagency supply chain task force?
    Ambassador Lighthizer. So our involvement--let me say, 
first of all, that of course I disagree with your proposition. 
I think the administration has done an amazing job, starting 
with what was basically an empty closet and then filling it up 
and getting an enormous supply in a totally unprecedented 
circumstance. So it is not surprising to you that I do not 
agree at all with your characterization.
    Secondly, when we talked about tariffs, the quote was from 
my hearing this morning in which I said in the long run I think 
part of the solution, part of the solution, ought to be 
rewarding people who manufacture the product in the United 
States. Two ways to do that. Maybe you do both. One is 
subsidies, if you decide you want to do that. The other is to 
have tariffs. Personally, I think you probably need both.
    In terms of our involvement, we have worked closely with 
HHS. We do not really work with FEMA. We work with HHS on what 
are the tariff consequences, what are the products that people 
think should get excluded, and then we have excluded the 
products from the tariffs that we have put into place. And we 
did this, by the way, in February or early March--I cannot 
remember, because there were some stages in it for exclusion 
from our tariffs on all products that touched the PPE space.
    So we have worked closely with HHS. We do----
    Senator Hassan. Mr. Ambassador, are you on--have you been 
involved in the task force?
    Ambassador Lighthizer. No.
    Senator Hassan. Okay. Let me move on to one other quick 
question, and I will just say that hard work that does not get 
people the PPE they need is not where we need to be. We need to 
be getting the PPE to people on the front lines in our country.
    And let me do this. I will submit--because I am seeing that 
we only have 20 seconds left on the clock--I will submit my 
next question about the way the lack of exclusions in the China 
tariffs is hurting small businesses in the middle of a 
pandemic. I will submit that in writing, and I will look 
forward to your response.
    Thank you very much, Mr. Chairman.
    [The question appears in the appendix.]
    The Chairman. I appreciate that, Senator Hassan.
    Now we go to Senator Cortez Masto by TV.
    Senator Cortez Masto. Thank you. Thank you, Chairman 
Grassley. And, Ambassador, thank you so much. It is good to see 
you again.
    Let me just reinforce what Senator Casey talked a little 
bit about. We are both introducing the Women's Economic 
Empowerment and Trade Act. It is an important piece of 
legislation to update the Generalized System of Preferences 
criteria. I know it expires at the end of the year. But the 
focus is on worker's rights and the rights of women to have 
equal protection under the law.
    And around the world women are going to disproportionately 
face challenges in the workplace, including legal barriers to 
work, restrictions on engaging in collective actions, 
restrictions on property ownership, educational opportunities, 
and heart-breaking reports of violence, harassment, and wage 
discrimination.
    We have to tear down these barriers. We have to support our 
safe workplaces globally, and this legislation includes common-
sense measures to strengthen existing standards for GSP and 
makes clear that countries need to guarantee the protection of 
their workers, workers' rights, and women's rights.
    So we look forward to working with you on this legislation. 
So I just wanted to make that clear.
    I do want to talk to you about an industry that is 
important for my State of Nevada, which is the tourism and 
hospitality industry that is so hard hit during this COVID-19 
pandemic. We are literally ground zero for the impact that this 
pandemic is having on travel, tourism, the hospitality 
industry, the entertainment industry in Nevada and across the 
country.
    The largest number of visitors to Las Vegas in recent years 
came overwhelmingly from Canada and Mexico. And the revised de 
minimis thresholds in the USMCA will surely encourage those 
visitors each year to spend a little more in our local 
community.
    But my question to you is, looking forward to the 2020 
trade agenda, what other policies can we consider to help 
stimulate and revitalize these sectors of our economy in the 
wake of COVID-19? I am curious if that is something that you 
have been looking to address in that particular industry and 
what you can do to help us revitalize it.
    Ambassador Lighthizer. So, thank you, Senator.
    First of all, we are happy to work with you on the bill 
that you and Senator Casey are introducing. As you know--and I 
am sure you heard my comment to Senator Casey--this is an 
important part of the President's agenda, and it is very close 
to the heart of Ivanka Trump who I think has done, I think we 
would all agree, a remarkable job of emphasizing this area. And 
we certainly agree with you on the basic equities. So I look 
forward to that.
    Secondly, the tourism and hospitality industry. When people 
ask me what is the economic effect of COVID and you look at the 
data and you see approximately a 30-percent or so reduction in 
exports and something less than that in imports, if you look at 
just about the single biggest area that is hit, it is in 
services and it is in hospitality, it is in travel, what they 
call the travel sector. So I mean we are very sympathetic to 
what is going on.
    We realize that--I do not know if it is the hardest hit 
sector but, if it is not, it is close to the hardest hit 
sector. And the United States has a very aggressive policy 
trying to encourage services trade agreements, trying to come 
to fundamental agreements on services, getting the USMCA 
agreement up and active and effective so that we do not have 
big hindrances there. I think that will be important.
    I would be very interested to hear what you think we ought 
to be doing. If there are things I should be doing, 
specifically to help the hospitality industry, because that 
is--I mean, it is huge for Nevada, but it is really huge for 
the whole country. Anything that you think that I should be 
doing, I hope you will bring it to my attention, either now or 
in the future, because I am completely committed with you on 
this.
    I think these people are hurt more than anyone, and they 
have to come back really, really fast if we are going to get 
back to where we were.
    Senator Cortez Masto. Well, thank you. And I am happy to 
talk to you about it, because it is not just about the free 
flow of goods across our borders. It is the travelers, the free 
flow of travelers. The international travelers have a major 
impact on our economy here in the United States, not just in 
Nevada, but in other States as well.
    So I am happy--and thank you for the offer, because we will 
definitely take you up on that and work with you. I so 
appreciate it. I notice my time is up. The rest of my questions 
I will submit for the record. Thank you.
    Ambassador Lighthizer. Thank you, Senator.
    [The questions appear in the appendix.]
    The Chairman. Senator Brown by TV.
    [Pause.]
    The Chairman. Senator Brown, are you there?
    Senator Brown. Thank you. Thank you, Mr. Chairman.
    Ambassador, I want to start by saying ``welcome.'' Good to 
see my friend from Ashtabula. I want to start by saying I read 
your recent piece in Foreign Affairs. I noticed you repeatedly 
referred to the ``Rust Belt.'' As someone born and raised in 
Ashtabula, you should know better than that. That outdated, 
offensive term demeans workers in Ohio and the Midwest and 
devalues the work for the industrial heartland, and we are----
    [Sound is lost.]
    The Chairman. You turned off. We cannot hear you, Senator 
Brown.
    Senator Brown. Okay; is it working now?
    The Chairman. Yes. We had you all through ``industrial 
heartland.''
    Senator Brown. Okay; thank you. The workers 60 miles from 
where you grew up in Lordstown were proud of their work until 
GM decided to close the factory and take away their jobs.
    I want to ask a question on their behalf. The last Cruze 
rolled off the line at Lordstown on March 6, 2019. GM knew well 
before that that they were going to close the plant. They 
announced they were building the Blazer in Mexico the last day. 
The second shift reported to work June 21, 2018. You know all 
these dates.
    This timeline is important. USTR was writing the rules of 
origin for the new NAFTA in the first half of 2018. You were 
closely consulting the car companies throughout the process. 
The rules of origin determine how much of a car has to be made 
in the U.S. to qualify for NAFTA benefits. You claim the 
updated rules will create tens of thousands of new auto jobs in 
our country.
    GM knew what the rules were. In fact, they helped write 
them. They still decided to close Lordstown and offshore Blazer 
production to Mexico.
    This week there is a news report that USTR staff in charge 
of writing the rules of origin were planning to start their own 
business to help auto companies comply with them. Even worse, 
they were letting the car companies know of their plans while 
they were still on your payroll.
    Many of us have long said that our trade deals are written 
in secret for corporations, by corporations, and the 
administrations of both parties--which you have criticized 
equally--vastly oversell the benefits of trade agreements.
    If the auto rules of origin were not strong enough to stop 
the offshoring of Lordstown jobs to Mexico, and if your staff 
at USTR were more focused on helping companies for their own 
personal gain than on helping American workers, why should 
American workers who lost their jobs at Lordstown believe 
President Trump's promises that the new NAFTA will actually 
create the auto-sector jobs that you and he claim?
    Ambassador Lighthizer. So, I am going to take that as a 
slightly tilted question. First of all, the Lordstown thing 
took us by surprise too. You know how annoyed the President 
was. The President made a big thing out of it. He called the 
CEO of General Motors, has on several occasions, and he is 
trying to fill that spot.
    Secondly, with respect to USTR staff, I had the same 
reaction when I read the article. These were two career staff 
people--not political people, career staff people--who 
consulted apparently with our ethics officials, who are career 
ethics officials. We do not of course appoint the ethics 
officials. And they at least said it was all right--I do not 
know anything about the website or what the conversations were 
between these career ethics people and these two career 
bureaucrats at USTR. But I had the same sort of reaction that 
you did in terms of the propriety of it.
    I do not know whether the law needs to be changed. I know 
political people could not do what they did. And if the Civil 
Service laws need to be changed to prevent that, then I 
certainly am sure that you and others can do that.
    Senator Brown. All right; I appreciate that. I mean, we 
feel a sense of betrayal by this administration. The President 
said, ``Do not sell your homes. We are bringing all these jobs 
back.'' We differ on how hard the President tried. You know, it 
is clear that Democrats on this committee demanded stronger 
labor standards in the new NAFTA. That is why we got Brown-
Wyden, as you know.
    It is clear that the China Phase One deal did not address 
provisions of China, did not address, or did not try to address 
China's low wages or anti-union laws. It is clear this 
administration negotiated a trade agreement with the next-
biggest economy in the world, not protecting workers or raising 
labor standards. That did not come up.
    So outside of trade, outside of the President's talk on 
trade--and I admire you as a public official. I think you have 
done your job well. But outside of the President's talk on 
trade, this is a pro-
corporate President who has passed the trillion-dollar tax 
giveaway, encouraging more companies to move overseas.
    He suggested paying for it on the backs of workers who paid 
into Social Security their whole lives. He has taken every 
opportunity to attack workers rights to organize and workplace 
safety standards. Four straight years of Trump's betrayal of 
workers have culminated in his efforts to force workers, mostly 
women, disproportionately black and brown workers, back to work 
in the middle of a pandemic.
    Dr. King said, ``All labor has dignity.'' That means all 
workers, whether you swipe a badge or punch a clock or work for 
tips or get a salary. And it is pretty clear--you used the term 
``dignity of work'' a number of times, intermittent with your 
use of the term ``Rust Belt.'' Dignity of work obviously means 
something very different to me than it does to President Trump, 
who has just consistently, as we know, betrayed workers in this 
country.
    The Chairman. Senator Cornyn----
    Ambassador Lighthizer. No, hold it, Senator. Mr. Chairman, 
I have to respond to that. That was--I disagree with every 
single word----
    The Chairman. And when you are done, we are going to go to 
Senator Cornyn. Go ahead, Ambassador.
    Ambassador Lighthizer. All right; thank you.
    First of all, I disagree with every single thing that you 
said, Senator. I think it is so unfair. We are being lectured 
literally by--by Democrats who did nothing for 8 years on the 
China issue, literally nothing. This President takes charge. He 
puts in tariffs. He challenges them. He has an agreement. He 
gets fabulous results. I made this comment before, and I want 
to make it again.
    I feel like I am being--like I am Churchill being lectured 
by Chamberlain. The fact is--now I realize you did not--you 
were not in the position of defending the Obama administration, 
Senator Brown, but the reality is, they did nothing. The Bush 
administration did nothing. This President has gone after China 
like no one else before.
    And he has changed rules of origin. He has changed these 
rules of origin that are going to bring back these jobs. Under 
the previous administration, eight of the previous 11 auto 
manufacturing plants built in North America were built in 
Mexico. That has all stopped.
    The reality is, he is bringing it back. And the Lordstown 
plant, there is a lot going on there. There is no way in the 
world we defend that. We do not defend what General Motors did 
at all on that. But that was not the result of what happened on 
our watch. That is what happened on the previous watch.
    Senator Brown. Mr. Chairman, I criticize Presidents when 
they betray workers, regardless of which party they are in.
    The Chairman. Senator Cornyn?
    Senator Cornyn. Well, thank you, Ambassador Lighthizer, for 
responding. I felt like we were here at more of a political 
rally than anything else, and certainly not in an effort to get 
information. But we should be, and I would like to ask you a 
question to get some information.
    So a number of Senators have brought up the fact that the 
COVID-19 virus has demonstrated the vulnerability of our supply 
chains in a way that nothing else has. And I read last week an 
essay that you wrote where you talked about the importance of 
reshoring our manufacturing base. And you made an interesting 
statement. You said trade policy alone cannot do that but only 
as part of a broader suite of tax and regulatory policies 
designed to encourage investment in the United Sates.
    We have talked a little bit about semiconductors, and I 
believe you and I talked about that on our conference call in 
the last couple of weeks. I just want to applaud the work that 
the administration has done to reduce, in the future, the need 
to import even sole-source semiconductors from overseas. So 
far, the President has reduced, and you have reduced the 
imports from China by half. And so I do think we need to take 
the next step. Because as you know, many of the most critical 
high-end semiconductors were manufactured in Taiwan.
    The administration has negotiated the building of a foundry 
in Arizona, but it is going to require that suite of tax and 
regulatory policies. So what specific measures would you 
recommend we use to incentivize production in the United 
States, including the tax code?
    Ambassador Lighthizer. First of all, I applaud your bill. I 
think it is--if we allow ourselves to be, in 10 years, where we 
cannot make the highest level of semiconductors in the United 
States, then shame on us.
    Everybody who is in political life right now should bear 
some of that shame. That is something that we--this is one of 
those things that is predictable. We do know this is going to 
happen, and we know that no matter what happens, semiconductors 
are going to be a key part of the economy of the future,
    And if you look, for those of you--and I know there are 
many members who care about artificial intelligence and how 
important that is for the future of American security as well 
as industry. Without semiconductors, you are not going to be 
the leader in artificial intelligence.
    So I applaud that. I personally have the view that we have 
to have manufacturing here, but I think we also have to have 
American companies have manufacturing here. I have a view in 
that world--I do not want to be mentioning specific companies, 
but we all know the leading company traditionally is Intel, and 
I think they have to be part of the solution. The Taiwan 
company I agree with you on----
    Senator Cornyn. If I could say, I agree with you. And 
Senator Warner and I have tried to craft the bill in such a way 
that it would benefit all semiconductor manufacturers, 
including those already here in the United States, and 
hopefully create an environment where there is some real 
competition and multiple sources here in the United States.
    But to my question, would you think that--do you agree that 
we could use or should use the tax code as part of that suite 
of policies designed to encourage that investment?
    Ambassador Lighthizer. Well, you clearly need subsidies, 
right? We all know that. You need subsidies, given the 
structure and the fact that other people are subsidizing. 
Whether it is in the form of tax credits or not--there 
certainly is a long history of using tax credits very 
effectively in this area. But I do not want to be the spokesman 
for the administration on all the details of your bill.
    I know that, as a general matter, the thrust of your bill 
is strongly supported in the administration.
    Senator Cornyn. Well, thank you. And I did not want to put 
you in that position, but I was intrigued by your essay. And 
obviously, since the Finance Committee is the principal tax-
writing committee, we are going to play an important role in 
that. And I know the chairman and ranking member know that as 
well.
    In that same vein, of the 26 multi-billion-dollar microchip 
fabs under construction in 2019, only one was located in the 
United States, and 17 were located in China. In the meantime, 
we are in a race for the next generation of telecommunications 
networks that would support 5G. With state-backed firms like 
Huawei, our ability to produce 5G equipment domestically is 
extremely limited.
    So what can we do, from a trade policy perspective, to 
constructively bridge the gap with our allies to counter Huawei 
and China as it relates to 5G?
    Ambassador Lighthizer. So at this point, I think the 
administration--through the export controls, which are part 
security and of course part trade policy--is taking a number of 
steps to make sure that we protect our own technology and that 
we use the fact that people need licenses to export and to use 
U.S. semiconductor manufacturing technology to sell to Huawei 
and other companies. So I think that is an important thing.
    I think when you end up putting together your package--once 
again you are going to say, ``This sounds like Lighthizer,'' 
but I think you have to have tariffs as part of the solution. I 
think you would want to incentivize.
    One of the ways you incentivize people to manufacture in 
the United States, and have traditionally done it, is through 
some kind of effective use of tariffs. Another way--straight-up 
grants, as you proposed in your bill, are another way. And my 
guess is, the solution is going to end up being a fine 
combination of all three.
    Senator Cornyn. Thank you very much.
    The Chairman. Senator Whitehouse, you have to get the 
record for being the most patient person. You have been here 
all afternoon. Go ahead, please.
    Senator Whitehouse. I am glad to be here. I thank you, Mr. 
Chairman, for holding this hearing, and I thank Ambassador 
Lighthizer, who may hold the record, at least with me, as the 
most responsive person in the Trump administration. We do not 
always agree, but you always get back to me.
    My question is about the marine plastic progress that was 
made in the USMCA. The article stipulates that the parties 
recognize the importance of taking action to prevent and reduce 
marine litter, including plastic litter and microplastics. And 
then it goes on to say that each party shall take measures to 
prevent and reduce marine litter. So I am wondering what 
measures have been taken pursuant to that paragraph.
    It goes on to say, the parties shall cooperate with respect 
to marine litter, including addressing land- and sea-based 
pollution, promoting waste management structure, and advancing 
efforts related to abandoned, lost, or otherwise discarded 
fishing gear--ghost gear. So I am interested in how you have 
been cooperating on that. And finally, specifically what have 
you demanded of Mexico? Because I see the language, but I do 
not--I am not aware of any activities that ensued.
    Ambassador Lighthizer. Thank you, Senator.
    Senator Whitehouse. So start with what measures each party 
has taken to prevent and reduce marine litter pursuant to the 
agreement.
    Ambassador Lighthizer. So first of all, thank you for that, 
for the question and also for your contribution to USMCA. It 
broke my heart, of course you know, when you did not vote for 
it. But nonetheless, you made a contribution to an important 
piece of bipartisan legislation that you did not support.
    But on----
    Senator Whitehouse. I think your heart is very robust, 
Ambassador. [Laughter.]
    Ambassador Lighthizer. I have been in town a long time. It 
is not the first time I have had my heart broken.
    I would say we are serious about this. I want to use it 
going forward. The agreement is not yet in effect. As you know, 
it goes into effect July 1st. We have an interagency 
environmental committee, which has already met once, and we 
should have another meeting, I think, scheduled for the 
beginning of July. And at that point, we are going to start 
putting in effect these provisions.
    This is something that we--that I think is innovative, and 
we are going to require action.
    Senator Whitehouse. The reason I asked here is because of 
the July 1st date, because that is kind of our last leverage on 
that agreement. And once that passes and we have moved on and 
it has gone into effect, it is a different landscape in terms 
of trying to push for action and enforcement.
    So between now and then--I do not know if you are going to 
be able to tee anything up before July 1st if part of that task 
force negotiation is to lay out some of the understandings as 
to how this will be implemented. I would love to hear about 
that. If that is not a between now and July 1st problem and you 
intend to pursue this issue after July 1st, I would like to 
hear about how. And with a minute and 45 seconds left, I am 
obviously not going to get a very robust answer here. But 
perhaps we can follow up to try to make sure that this language 
just does not go into immediate desuetude and do nothing but be 
a dust-gathering paragraph.
    Ambassador Lighthizer. So, you know, I certainly do not 
want that to happen. And I agree with the spirit as well as the 
letter of it. I look on it the opposite way. To me, we really 
do not have any rights under the agreement until the agreement 
comes into effect. So we cannot really enforce it until it 
comes into effect.
    What we have done, and what we have spent tens of thousands 
of hours doing over the last several weeks, has been getting in 
place all the rules, including the Brown-Wyden--in case Senator 
Brown is still watching--which was a very important enforcement 
part. It was not the standards part, but it was a very 
important enforcement part of this, getting those rules in 
place, setting up the structure so that we can then insist that 
Mexico do what they have to do. What we had to do was, we had 
to certify that they have the legal ability to do it in Mexico 
and in Canada, and when we get to July 1st we can say, okay, 
fine, there is compliance.
    And that interagency committee that we all put together is 
well-funded and is already staffed, and that committee's 
responsibility is to make sure--there are a variety of other 
things--but to make sure that this happens.
    And I will certainly--we chair that committee, we, USTR, 
and also we talk to the person who chairs it, and I am going to 
ask him precisely what you just asked me about what our timing 
is.
    Senator Whitehouse. And at some point, I guess post-July 
1st then, when you are settling into how you are going to 
impose these measures or effect this cooperation, or demand 
something of Mexico, perhaps we can have a conversation with 
whoever in your office has the wheel on that to see how that 
plan is going to be rolled out.
    Ambassador Lighthizer. We will do that. And I appreciate 
your staying on it, because down the road, if members of 
Congress do not insist on enforcement, there will not be any 
enforcement, I feel.
    Senator Whitehouse. And even sometimes when we do. 
[Laughter.]
    Ambassador Lighthizer. And even sometimes when you do.
    Senator Whitehouse. Thanks.
    Ambassador Lighthizer. Thank you, Senator.
    The Chairman. Senator Cassidy by TV.
    Senator Cassidy. Hey, Mr. Ambassador. If this is your 
second hearing today, and it is now 5:30, you are doing a great 
job, and thank you very much for your patience and for just 
hanging in there. You still look fresh.
    The thing about going near the end is that most folks have 
asked questions, but I have one question which has not been 
asked and another which is more based upon your article.
    Investors--talking about the Mexico energy sector--have 
been seeing that the Mexican Government appears to be tilting 
the table towards Pemex and CFE, the Mexican utility company, 
changing the rules for U.S. investors, and this is related to 
energy exploration or production, the fuel permits downstream 
to power, and renewables. Again, it seems like they are trying 
to privilege their state-owned enterprises.
    USMCA has specific mechanisms to have a level playing 
field. Can we expect this to be redressed once the USMCA is put 
into effect? Are you aware of this?
    Ambassador Lighthizer. So, I am aware of it. I do not know 
about every detail, Senator, that you are aware of. I am sure I 
do not know that much. But I am aware of it. I know it is a 
problem. It is something that we expect to enforce.
    I would say the administration in Mexico, as you know well, 
very much wants to go in the direction of nationalizing energy 
production. That is one of the things that they feel very 
strongly about. And pushing back against that is something that 
we have done in this agreement, and expect to do. And I think 
personally--although it is not my business, perhaps--in the 
long run this is not in Mexico's interest to take competition 
out of the equation in something as valuable as energy 
production.
    But my impression is that is clearly the direction that 
that administration down there wants to go in. And to the 
extent we have tools, we expect to use them to require equal 
treatment.
    Senator Cassidy. Thank you. Going to your Foreign Affairs 
article, which is an interesting article because you have a lot 
there which is latent, if you will, but you acknowledge that 
some supply chains will have at least a portion outside the 
United States, and at some times that is related to labor costs 
and to environmental standards.
    You are not endorsing--I think you are just acknowledging. 
I have been thinking that it probably benefits the United 
States more if those supply chains are in Latin America than if 
they are in, say China. I say that because it looks like 
NAFTA--one benefit from NAFTA is, it stopped net migration from 
Mexico to the United States.
    There are now jobs there, and that in turn has led to 
higher expectations in Mexico. And I do not know if you have 
thoughts on that. And, as we talk about bringing the supply 
chain back from China, at least in part, what are your thoughts 
about, to what degree it may not be in the United States, at 
least trying to keep it in Latin America?
    Ambassador Lighthizer. Senator, I certainly agree with the 
thrust of your analysis. I think it is not just China, it is in 
Asia generally, we are better off having--in the first place, I 
think all the supply chains ought to run through the United 
States. I kind of take your point and have acknowledged that 
there are situations where that is probably not going to 
happen. In those cases, are there places that are better 
economically and geopolitically for the United States to have 
those supply chains? Absolutely.
    And I think that is a positive outcome if it works that 
way. And I think a healthy, peaceful Mexico, for example--and 
you could, by extension, say other countries in Latin America--
is clearly in the interest of the United States, both in terms 
of creating customers, but also creating good neighbors for all 
of our States along the southern border.
    So I completely agree with the thrust of what you are 
saying. When you get to the specifics, of course everybody can 
have their own views. But I think what you are saying is 
correct. And I am flattered that you read the article, and I 
hope it made some contribution to the way people think about 
trade policy generally.
    Senator Cassidy. It was very good. And intuitively--and I 
do not know this to be the case, but do you have any data that 
the U.S. has somewhat pulled out of Latin America and moved to 
Asia? Clearly China has filled the void within Latin America. 
And it may be beyond the scope of your office to have done an 
assessment of that, but I think that has been to the detriment 
of our geopolitical position.
    Do you have an assessment of that?
    Ambassador Lighthizer. So we have not done an actual study 
of that. My own sense is that it is more that when, rather than 
pull out of Latin America and China, rather than do that, at 
the time that these companies were going, China, and then later 
Vietnam and a whole variety of others on the next tier, were 
more hospitable, were more aggressive in terms of getting the 
supply chain.
    So I do not know if there a lot of examples--none pop into 
my head--of somebody leaving someplace in South America. There 
may be such cases, but I think the tendency tends to be that, 
at the time when this happened, that was the place to go.
    And to be honest, one of the things I sort of allude to is 
that you end up with a bunch of business consultants who say, 
``Here, go there.'' And then all of a sudden, everybody goes 
there. So there was a kind of a lemming effect also.
    Senator Cassidy. Thank you very much. I yield back.
    The Chairman. Thank you.
    Senator Lankford, by TV.
    Senator Lankford. Ambassador, thanks again for the work 
that you continue to do and for the marathon day today, to be 
able to talk through all the issues today.
    Let me walk through just a couple of issues, and one of 
them is not going to be a surprise to you, and that is the 
Pacific. The UK, whom we are now working on a trade 
relationship with, is also actively working with New Zealand 
and Australia in trying to be able to focus in on the Pacific 
Rim on trade agreements. What I want to know is what progress 
the United States is making on any new trade agreements in the 
Pacific.
    Ambassador Lighthizer. So we have discussions ongoing, as 
you and I have discussed, on the issue of e-commerce with New 
Zealand. We have a--of course you know well we have a 
longstanding FTA, which I personally believe has been one of 
our more successful FTAs, with Australia.
    In terms of trade agreements, I am trying to think--that is 
probably about it. We have had trade discussions across the 
board, and those have led to a variety of successes in terms of 
clearing up a whole variety of impediments to U.S. exports, and 
in some cases opening up markets to the United States. I could 
kind of go through those.
    It is an interesting thing. People think of the USTR as 
being involved in these big negotiations, and of course we are 
involved in big negotiations, but an awful lot of what we do is 
regular negotiations which we have. But we have a big 
negotiation with India, which I am sure you are aware of, and 
potentially even moving to an FTA at some point if we can ever 
make any headway, and that is Asia.
    But we have a lot of ongoing discussions. We call them 
TIDFs, Trade and Investment Discussion Forums, or negotiating 
forums, with most of the countries throughout that area. 
Indonesia, we have been very active; Malaysia--so across the 
area. There is an awful lot of engagement, but not necessarily 
leading to an FTA.
    Part of the reason for that is, we are trying to clear up 
specific irritants that we have, or that they have, or 
impediments to free trade. And also part of it is that it is 
such a big issue to enter into an FTA, to go through the whole 
process. So it is something that we tend to do kind of less 
often.
    Senator Lankford. Right. Well, there are targeted countries 
there that we need to work on a bilateral agreement with long-
term, and we can continue to follow up on that.
    Let me shift into a single issue on this. And that is, 
still our focused dependence on critical minerals, rare earth 
minerals coming out of China. Depending what the mineral is, we 
are still dealing with 60 to 90 percent of our rare earth 
minerals coming out of one source, out of China, and we have 
seen them before in 2010 cut off Japan for a season due to a 
political issue there.
    And so they clearly used rare earth minerals as a leverage 
point in their negotiations in the past. How is it going, 
working with countries like Australia, other entities, 
Malaysia, that have a lot of these rare earth minerals as well 
to be able to expand availability and openness? And then, 
obviously, we want to be able to do more production here in the 
United States as well.
    What is that conversation like to try to get us away from a 
single source, a single point of vulnerability with China?
    Ambassador Lighthizer. Well, first of all, I completely 
agree with your assessment of where we are on rare earths. And 
I have had a number of conversations on those. It is not an 
area--the solution is not entirely within USTR's realm, but we 
have a part of it. The other part of it is also the Department 
of Commerce, the Department of Defense, NSC, and others. There 
is a lot of focus on this area right now.
    I have talked to a variety of businessmen too. Many of 
these rare earths, as you know well, we have in the United 
States but we cannot economically get them out and compete with 
China. So it is a policy that is being developed. I am not 
primarily responsible for it. I am very supportive and grateful 
for your specific emphasis on it, because this is something 
where there is reasonable thought that there is going to be a 
train wreck at some point down the road. And people like you 
and others who are seeing it and working on it are hopefully 
going to be a part of avoiding that train wreck.
    Senator Lankford. Yes. One of the things that I have raised 
over and over again is, if we think it is a problem with China 
cutting off PPE from us during a pandemic, wait until they cut 
off rare earth and critical minerals. When that happens, it 
really is an economic disaster at that point. We do have a 
single point of failure and a lot of vulnerability there. That 
is five state-owned entities out of China that are managing 
that, that we are trying to beat with the prices and with the 
non-environmental rules, and everything else that they do 
there. And so it is definitely not a clear trading platform for 
us in trying to be able to negotiate and for our domestic 
manufacturing rising up, and it is one of the issues that we 
are going to have to resolve long-term.
    Any focus that you can have, and anything that I can 
continue to raise on that, we will continue to push on it. So I 
appreciate your focus and where we can expand that and 
definitely discourage Australia from allowing Chinese companies 
to be able to purchase some of their mines and some of their 
capabilities, because, if that happens, then we will lose one 
more of our sources to Chinese ownership in Australia.
    So I appreciate your engagement. Thanks for all the work 
that you continue to do.
    Ambassador Lighthizer. Thank you, Senator. I appreciate 
that.
    The Chairman. Senator Daines?
    Senator Daines. Thank you, Mr. Chairman. Ambassador 
Lighthizer, thanks for coming up here again.
    I very much appreciate the work you have done in advancing 
new agreements with our four largest trading partners. I think 
we have kind of lost perspective on that. We had these great 
deals signed, and then we went into impeachment, COVID, and I 
think we have lost sight about the importance of these four 
agreements with Canada, Mexico, China, and Japan. So, 
congratulations on those wins--very important.
    They are important for a Senator from Montana because, as 
we think about the access to our markets, our farmers and our 
ranchers and our other businesses depend heavily on those 
markets. And when you step back and think that 95 percent of 
the world's consumers live outside the United States, if we are 
going to grow our businesses, our ag economy, it is going to be 
highly dependent on growing greater market share with 95 
percent of the rest of the world's consumers who live outside 
the U.S.
    As you know, Montana is the number one PLS crop producing 
State in the country--peas, lintels, soybeans--and India is the 
world's largest consumer of PLSes and an important market for 
Montana farmers. Unfortunately, U.S. PLSes face high tariffs 
and an unfair playing field in India, and that is why earlier 
this year Senator Cramer and I gave the President a letter 
urging him to prioritize the issue and raise it directly with 
Prime Minister Modi. In fact, I was pleased to see the 
President, President Trump, hand-deliver that letter to Prime 
Minister Modi. In fact, he sent a picture back handing that 
specific letter to the Prime Minister and wanted to make sure 
that we saw it. So I applaud the President's personal 
leadership there during that state visit.
    My question is this: what is the status of negotiations 
with India? And will you commit to working to remove these 
tariffs in any ongoing negotiations?
    Ambassador Lighthizer. The answer is ``yes.'' And then I 
will elaborate.
    First of all, I appreciate very much working with you and 
your sort of dogged insistence on us paying attention to 
agriculture, and not just PLS, beef, and other products of 
Montana. And there are three or four----
    Senator Daines. Ambassador Lighthizer, there is another guy 
who is dogged right here. His name is Chairman Grassley. 
[Laughter.]
    Ambassador Lighthizer. I was just going----
    Senator Daines. We could consider it a tag team here, if we 
need to.
    Ambassador Lighthizer. There are a few of you who every 
time I go into these negotiations, I normally hear from before 
and after, and I think about you during. So you really have 
made an impact in terms of the agreements we have, a lot of 
them molded by your effort and Senator Grassley's effort, and 
several on the Democratic side also who were just insistent 
that we do this. And I think they are all--all the agreements 
are better because of your involvement in them.
    The MFN tariffs that India has are extremely high on PLSes, 
and on just about everything else. And one of the indictments I 
have of the WTO is the fact that we find ourselves in this 
position.
    When India joined the GATT, then the GATT, in like 1948, 
they had a GDP of maybe $250 billion. Now they are almost $3 
trillion. And they still have a third of their lines of tariffs 
not bound at all, and a whole bunch of them bound at 100 
percent. And there is nothing we can do about that.
    How do we change that? And the notion that we are locked 
into a WTO that says just forever you are stuck with that 
imbalance, is to me crazy. And we have to do something about 
it.
    In terms of the status, we are ongoing with the 
negotiations. I think it is clearly taking longer than I would 
have seen. They are doggedly insistent on keeping their 
tariffs, and we are dogged in insisting that we are going to 
get a fair deal. So we are still working on it very much, and 
hopefully we will get to a good outcome.
    Senator Daines. Thank you. And again, as the number one PLS 
producer in the country, we appreciate your determination to 
move that negotiation to the right place.
    I want to switch gears to China Phase One. Ambassador 
Lighthizer, it is essential that Phase One agreement is 
implemented as quickly as possible and that China is held 
accountable for its commitments in the trade deal. My question 
is this: is China acting in good faith as it relates to the ag 
purchase commitments in the Phase One agreement?
    Ambassador Lighthizer. In my judgment, they are. Remember 
the timing. This was not in effect until February 14th. 
February is not that long ago. Given particularly the length of 
time in terms of ag sales, they started giving the exclusions 
from their tariffs at the beginning of March. They have granted 
a great deal of them, including--of interest to the chairman--
on ethanol, and I think we are going to start seeing some 
ethanol purchases, hopefully of significance.
    Are they behind? Yes. But you cannot look at it--it is not 
like they agreed to a certain amount every month, right? So if 
you think of the deal generally, about a third of the deal, 
say, is soybeans. And they have already purchased maybe $3 
billion worth of soybeans. But as you know, soybeans tend to be 
a fall market.
    So if you look at--I made this point before--if you look at 
2017, we sold $10 billion worth of soybeans at the end of the 
year. I would expect that we will see that again.
    So are they behind? Yes. Are they making substantial 
purchases? In the way we calculate it--which is not just what 
is exported, because that is weeks and weeks before it was 
bought, but actual purchases--the number is pretty high. The 
trajectory is good. Last week alone, they bought half a billion 
dollars' worth of soybeans. They bought a lot of beef. They 
have beef coming in now for the first time ever.
    And if you look at where they are versus where we were in 
our best year ever, we are ahead of it in almost every single 
major crop. But we have a long way to go.
    Senator Daines. Well, it has just been since February 14th 
too, so it has just gotten started here.
    Mr. Chairman, can I ask another question? Or is there 
somebody else in the queue?
    The Chairman. No, you are the last. That will be your last 
question, and I have one question, and then we will adjourn.
    Senator Daines. Okay; thank you.
    I also appreciate your efforts to include polysilicon in 
the Phase One agreement. For years, the U.S. polysilicon 
industry has been targeted by China, and retaliatory tariffs 
are threatening some high-wage manufacturing jobs that relate 
directly to REC silicon in Butte, MT. Could you provide an 
update on any developments regarding polysilicon and how China 
is moving forward with any purchases?
    Ambassador Lighthizer. So I will talk to you about that 
offline. It is something that I know is important to you. It is 
something, therefore, that is important to me and that we are 
working on. I would be happy to talk about it offline.
    Senator Daines. Okay; I will look forward to that 
conversation. Thanks, Ambassador.
    So to conclude, I have seen a pretty impressive result 
here, and I wanted to really commend you for that. USMCA and 
the China Phase One deal have garnered much of the attention 
over the past several months, and that is understandable, but I 
view the agreement reached with Japan as one of the truly 
unsung hero stories, and one that is just as important, if not 
more so for U.S. ag, and particularly for beef.
    Japan is our largest beef export market. This agreement 
helped level the playing field for Montana ranchers in this 
important market. In the months following the agreement, beef 
exports--and I have the chart here--beef exports to Japan have 
increased by nearly 25 percent year-over-year. That is the 
January to April time frame. So we are up almost 25 percent 
with our largest beef export market in the world, which we are 
grateful for.
    That is a significant win. I want to thank you and your 
team for your efforts. My cattle producers are having a hard 
time right now, whether it is COVID-related or issues with 
packers. It is nice to see that Japan volume increase by nearly 
25 percent. Thank you for the work as you open these markets 
and reduce these barriers. I think there is a bright future 
ahead of us in Japan as well.
    Ambassador Lighthizer. Great. I just want to thank you 
again, and tell your ranchers we are thinking about them all 
the time. And thank them for what they do, because we would not 
have any of this beef to ship if it was not for them. So thank 
you.
    Senator Daines. It is the best beef in the world--U.S. 
beef. So thank you.
    The Chairman. Before I ask my last question, it sounds like 
I am probably the only one who has not told you I have read 
your missal. I am about a third of the way through it.
    Ambassador Lighthizer. I am honored that you even got that 
far. So thank you for that.
    The Chairman. I recognize--this is my question. I recognize 
that many of the USMCA's commitments might be models for other 
free trade agreements, but not all. For example, USMCA requires 
Mexico and Canada be a party to the Inter-American Tuna 
Commission, which concerns management of fisheries in the 
eastern Pacific Ocean.
    It also has measures that are specific to Mexico's recent 
labor reforms. I do not see those same issues with the UK, 
which does not border the eastern Pacific and already has 
pretty high labor standards. On the other hand, there are some 
unique issues that we have with the UK as a result of their 
time with the EU, including restrictions on our agricultural 
products. So I hope you can assure me and the committee that 
our proposals for the UK agreement recognize these important 
distinctions.
    Ambassador Lighthizer. Absolutely. We absolutely do, Mr. 
Chairman.
    The Chairman. Then for you, thank you for your appearance 
today, and in particular to keeping your obligation to consult 
with our committee on a regular basis. You have surely done 
that today, and you spend a lot of time doing it, and I know 
you have a lot on your plate. We appreciate your willingness to 
spend time with us, discussing these issues and hearing us out.
    So, for my fellow Senators, if you have questions for the 
record, please submit them by close of business on July 2nd. 
And with that, I thank you once again, Mr. Ambassador, and the 
meeting is adjourned.
    Ambassador Lighthizer. Thank you very much, Mr. Chairman. 
It was a pleasure to be here.
    [Whereupon, at 5:54 p.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


               Prepared Statement of Hon. Chuck Grassly, 
                        a U.S. Senator From Iowa
    I am pleased to welcome our witness, Ambassador Lighthizer. Mr. 
Ambassador, thank you for joining us.

    I'm eager to have you here, because we face grave challenges. 
Americans are suffering. The pandemic and long-festering injustices 
deny too many of our citizens the very promise our country is built 
upon: that every American has the right to life, liberty, and the 
pursuit of happiness. It's not going to be easy to bring us back on 
course. But I think good trade policy will be one important part of 
doing so. So I'm glad we can have that discussion today.

    Trade policy is immediately significant because we need to make 
sure we don't have any unnecessary taxes on goods key to the recovery 
or in fighting the pandemic. That's why I've asked the International 
Trade Commission to conduct a study on precisely what those goods are, 
where they come from, and how much they're taxed. This study, which is 
ongoing, will provide an independent and transparent snapshot of the 
medical and PPE supply chains. It's important that we carefully study 
these supply chains before we rush to judgment and action.

    We have to take a long, hard look at our ability to protect 
ourselves in a future crisis. But we have to find a smart solution that 
accepts the reality that trade is fundamental to our survival and 
prosperity. In the long term, trade is a key part of the solution, 
because it promotes freedom. It provides customers for our best-in-
class agriculture products. It eliminates arbitrary barriers that 
inhibit entrepreneurship and independence.

    In particular, trade empowers small businesses that are the 
backbone of our communities. In fact, 97 percent of U.S. exporters are 
small businesses. A good start to empowering people and fixing our 
economy is making sure as many people as possible have the option of 
being their own boss. We owe it to them and their communities to press 
for even more opportunities. This is especially true because our 
trading partners already enjoy the fact that we have one of the most 
open economies in the world.

    Ambassador Lighthizer, you have taken important steps in that 
direction. I'm pleased this year started off with Congress approving 
the United States-Mexico-Canada Agreement. USMCA is expected to spur 
176,000 new jobs and create new opportunities with our two most 
important trading partners.

    We are just a couple of weeks away from USMCA entering into force, 
and we owe it to our American farmers, workers, businesses, and 
innovators to make sure this agreement delivers. I look forward to 
implementing a new era in North American free trade and focusing on the 
many other issues in the President's trade agenda. The issues are 
complex and challenging. But the Trump administration is ambitious. If 
we get them right, the opportunities for Americans are immense. I want 
to highlight a few in particular.

    First, we have the free trade negotiations with the United Kingdom. 
Good trade relations with the United Kingdom are critical. In 2017, we 
exported $125.9 billion of goods and services to the UK. UK companies 
in turn have invested over $540 billion in the United States. 
Unfortunately, those numbers don't reflect our full potential.

    In large part, EU rules stood in the way. These rules unfairly 
restricted our agricultural goods without any scientific basis and 
required duplicative and unnecessary testing for our industrial goods. 
Now that the UK has been freed from them, we can bring our economic 
relationship to a level befitting our longstanding political special 
relationship. An improved trading relationship with the UK will also 
signal to the EU that it's past time for them to start regulating on 
the basis of sound science.

    I'm also looking forward to trade negotiations advancing with 
Kenya. We don't have a single free trade agreement with a sub-Saharan 
country. I applaud the Trump administration for being the first 
administration to take this on. A high-standard FTA with Kenya can be a 
model for both good economics and good governance throughout the 
region.

    Third, I'm glad the administration remains committed to WTO reform. 
The WTO's rules, including those on services, agriculture, procurement, 
and intellectual property, are vital for our workers and businesses. 
They reflect decades of persistent American leadership. We can't let 
China take the pen when it comes to writing these rules. Instead, 
Congress and the administration must work together to fix this vitally 
important institution. We will revitalize the WTO's negotiating 
function so that the rules reflect the modern economy, including e-
commerce.

    Additionally, Congress will continue to insist that rules remain 
enforceable--and applied as written. That's why I'm glad the trade 
agenda highlighted the administration's WTO enforcement wins against 
the EU over its Airbus launch aid; against China over its policies on 
wheat, corn, and rice; and India over its export subsidies. There are a 
lot of problems with the WTO, but it has an important role to play--
including through the use of binding dispute settlement. The trick is 
to make sure those rules are followed rather than re-written by WTO 
judges. Mr. Ambassador, I think together we can accomplish this task.

    Finally, I note that the trade agenda highlighted that the 
administration took strong action against discriminatory digital 
services taxes. With the recent announcement of more investigations, 
the Trump administration is demonstrating that America will not stand 
for discriminatory treatment that treats American companies as piggy 
banks. Our businesses are entitled to fair and equitable treatment, and 
we will defend our rights appropriately.

    In closing, I want to emphasize this point: the President has laid 
down an ambitious agenda that can improve the lives of our fellow 
citizens. But it will require commitment and cooperation from all of 
us. The Constitution vests Congress with authority over trade, not some 
generalized interest. We can't simply be passengers along for the ride. 
We must fulfill our constitutional role so that our trading partners 
know that Ambassador Lighthizer has the full support and power of the 
United States behind him.

                                 ______
                                 
 Prepared Statement of Hon. Robert E. Lighthizer, United States Trade 
           Representative, Executive Office of the President
                              introduction
    Chairman Grassley, Ranking Member Wyden, and members of the 
committee, it is a pleasure to appear before you today to testify on 
the President's 2020 trade agenda.

    By placing trade at the center of his agenda in 2019, the President 
achieved more trade successes over the last year than most 
administrations achieve over multiple terms. And while the coronavirus 
has negatively affected the economy in recent months, the benefits of 
the President's trade and economic policies were unmistakable prior to 
the onset of the pandemic. Wages were growing faster for nearly all 
groups, especially those at the lower end of the income scale. Since 
President Trump took office, average wage growth for Americans without 
a bachelor's degree has outpaced wage growth for those with a 
bachelor's degree or higher. Average wage growth for individuals at the 
10th percentile of the income distribution has outpaced wage growth for 
individuals at the 90th percentile. Wealth inequality also declined, as 
the share of net worth held by the bottom 50 percent of households 
increased, while the share held by the top 1 percent decreased.

    Net worth for the bottom 50 percent of households increased at an 
annual rate 15 times higher than the average growth seen under the 
three prior administrations' expansion periods. Average wage growth for 
African Americans and Hispanics has outpaced overall average wage 
growth. At more than $66,000, real median household income hit the 
highest level ever recorded. 15,000 manufacturing jobs were lost in the 
12 months prior to President Trump's election, but more than 500,000 
manufacturing jobs were added to the American economy from November 
2016 to January 2020. This contributed to unemployment reaching 
historic lows in 2019, with job openings exceeding people looking for 
work by more than 1 million.

    These figures represent a blue-collar boom under the Trump 
administration, a boom that will continue as we reopen our economy and 
establish a path forward that better protects our economic security.

    President Trump promised to make fundamental changes to U.S. trade 
policy to achieve results that benefit all Americans, and the President 
has kept that promise. The President directly confronted China's 
abusive trade practices through substantial tariffs, resulting in the 
groundbreaking Phase One trade agreement signed on January 15th of this 
year. The agreement secured enforceable commitments from China to cease 
its abusive trade practices--including intellectual property theft, 
forced technology transfer, discriminatory regulations, and currency 
manipulation. It also committed China to significantly increase its 
purchases of U.S. goods and services by at least $200 billion over 2017 
purchase levels.

    By establishing a strong dispute resolution system and maintaining 
tariffs on approximately $370 billion in goods from China, the 
administration has maintained the authority and leverage to enforce 
China's compliance with the agreement while pursuing additional reforms 
under a future Phase Two agreement.

    On January 29th of this year, President Trump signed the United 
States-Mexico-Canada Agreement into law after Congress overwhelmingly 
approved the deal by a vote of 89-10 in the Senate and 385-41 in the 
House of Representatives. The landmark agreement fulfilled the 
President's promise to rebalance the U.S. trade relationship with 
Mexico and Canada while incentivizing manufacturing in the United 
States, defending our competitive advantage in technology and 
innovation, protecting workers and the environment, and securing even 
greater market access for America's businesses, farmers, and ranchers. 
USMCA was a bipartisan victory for the American people, and I would 
like to thank all of the members who contributed so much to the 
negotiations and implementing bill.

    Last year, the United States also entered into two agreements with 
Japan that established preferred or zero-rate tariffs on more than 90 
percent of U.S. food and agricultural products imported into Japan and 
enhanced the existing $40 billion in digital trade between our 
countries.

    In addition to new trade agreements, the administration has 
continued to seek strong and effective enforcement of our existing 
trade agreements and the WTO commitments of our trade partners. Last 
year, the United States won the largest award in WTO history, obtaining 
the right to impose countermeasures on $7.5 billion of goods from the 
European Union in response to the harms caused by EU Airbus subsidies. 
The U.S. also secured increased access to the EU's beef market after 
successfully challenging a non-science-based ban on certain hormones.

    In addition, the United States initiated action against France for 
its ``digital services tax,'' which targeted American technology 
companies. This action resulted in an agreement to suspend collection 
of the tax while OECD countries discuss a fairer and more standardized 
approach. USTR is continuing to analyze similar measures worldwide, and 
recently initiated section 301 investigations of digital services taxes 
in ten additional countries.

    Furthermore, the United States has successfully challenged 
distortive Chinese agricultural trade practices; Indian export 
subsidies for steel, pharmaceuticals, chemicals, information technology 
products, and textiles; and retaliatory tariffs unfairly levied by five 
countries in response to the President's steel and aluminum tariffs.

    Lastly, the United States has engaged extensively with WTO members 
on a range of issues. After years of complaints by multiple 
administrations, the Trump administration took action against WTO 
Appellate Body abuses by exercising our right to not approve new 
members. This action has forced the WTO to engage in a long-overdue 
debate about the role of the Appellate Body.

    Alongside this action, USTR issued its report on the Appellate 
Body, which details how the body frequently fails to apply WTO rules as 
agreed to by WTO members, imposing new obligations and violating 
members' rights. The United States also offered a proposal to establish 
consequences for non-compliance with WTO notification obligations, as 
well as a proposed General Council decision that would establish 
objective criteria for determining which WTO members should qualify for 
blanket ``special and differential treatment.''
                          trade policy agenda
    This year, President Trump will continue to pursue new trade 
agreements that benefit all Americans, aggressively enforce our trade 
laws, respond to unfair trade practices by other nations, and work 
toward reform at the World Trade Organization.

    The Trump administration has taken numerous steps to pave the way 
for negotiating a trade agreement with the UK, including a review of 
public comments, a public hearing, and extensive consultations with 
congressional and trade advisory committees. USTR published detailed 
negotiating objectives on February 28, 2019, and aims to reach an 
agreement with substantive results for U.S. consumers, businesses, 
farmers, ranchers, and workers as soon as possible.

    On February 6, 2020, President Trump announced that the United 
States intends to initiate trade agreement negotiations with the 
Republic of Kenya. This action falls in line with Congress's support 
for mutually beneficial trade agreements with the countries of sub-
Saharan Africa. A trade agreement between the United States and Kenya 
will complement Africa's regional integration efforts, including the 
landmark African Continental Free Trade Area. Such an agreement will 
also serve as a model for additional agreements in Africa, expanding 
U.S.-Africa trade and investment across a continent that will account 
for nearly a fifth of the world's consumers by 2030.

    The United States also seeks to rebalance our trade relationship 
with the European Union. For many years, U.S. businesses have been at a 
disadvantage in doing business in the EU. Both tariff and non-tariff 
barriers in the EU have led to increasing and unsustainable trade 
deficits with the EU--reaching $179 billion in 2019. With recent 
changes in EU leadership, the United States is hopeful for more 
progress in the coming year.

    The United States also seeks to build on the accomplishments of the 
past year and work toward more comprehensive agreements with Japan and 
China that promote fairer and more reciprocal trade. In the case of 
Japan, the two countries intend to enter into further negotiations on 
customs duties, barriers to trade in services and investment, and other 
trade restrictions. With China, ``Phase Two'' will focus on issues of 
overcapacity, subsidization, disciplines on China's state-owned 
enterprises, and cyber-theft.

    More broadly, the Trump administration will continue to 
aggressively enforce U.S. trade laws to protect the interests of 
American businesses and workers, taking strong actions to ensure 
America's trade partners comply with the terms of our trade agreements. 
The Phase One agreement with China established a strong process for 
ensuring that China honors its commitments and imposing proportionate 
measures if it fails to do so. Likewise, the USMCA contains a detailed 
process for enforcing commitments, and the President has established 
working groups to monitor the implementation and maintenance of the 
labor and environmental provisions.

    USTR will also pursue formal challenges to acts, policies, or 
practices of foreign governments that are inconsistent with WTO rules 
and other recognized standards. For example, USTR is investigating the 
digital services taxes of ten additional countries, as mentioned above. 
USTR has also launched eight GSP reviews under this administration, 
ensuring that countries enjoying favorable tariff rates in the United 
States follow the clear labor, IP, and market access standards 
necessary to qualify for the program.

    The administration will also look for ways to strengthen our 
existing trade policies to better protect American producers and 
consumers. One option is to tighten de minimis thresholds for American 
imports, including those subject to section 301 tariffs. At $800, the 
U.S. de minimis threshold far exceeds that of our major trade partners. 
For example, the EU threshold is only $150, while China's stands at a 
mere $7. This results in massive numbers of shipments to the U.S. 
receiving duty-free treatment and virtually no screening. In FY 2018 
and FY 2019, there were a combined 1.2 billion de minimis shipments, 
with 719 million (or roughly 60 percent) coming from China. In 
contrast, the U.S. received only 68 million formal entries during this 
period, with only 7.3 million (or less than 11 percent) coming from 
China. The disproportionately high volume of these shipments indicates 
China and others are likely exploiting the high U.S. de minimis 
threshold to avoid paying duties.

    Lastly, the United States will continue to pursue reforms at the 
WTO aimed at limiting the organization to its original role as a forum 
for nations to negotiate trade agreements, monitor compliance, and 
facilitate trade dispute resolutions. At present, over 150 disputes 
have been filed against the United States at the WTO, while no other 
member has faced even 100. Worse, up to 90 percent of these disputes 
have resulted in a report finding the U.S. at least partially at fault. 
This averages out to five or six successful WTO disputes against the 
United States every year.

    In other words, the WTO has effectively treated one of the world's 
freest and most open economies--with an enormous trade deficit--as the 
world's greatest trade abuser. In so doing, the WTO's Appellate Body 
has often created new obligations out of thin air, preventing the 
United States from taking action to address unfair trade practices that 
hurt U.S. workers, and usurping the U.S. government's accountability to 
the American people. This situation has also greatly undermined the 
negotiating process at the WTO, as countries now believe they can 
obtain better outcomes through litigation than through negotiation, 
especially with the United States.

    In addition to reigning in the Appellate Body, the United States 
will also seek a broader reset at the WTO. Currently, outdated tariff 
determinations are locked in place that no longer reflect members' 
policy choices and economic conditions. As a result, many countries 
with large and developed economies maintain very high bound tariff 
rates, far above those levied by the United States. The United States 
must ensure that tariffs reflect current economic realities to protect 
our exporters and workers. To that end, the United States will also 
seek broader support for our proposals concerning notification 
enforcement and ``special and differential treatment'' for developing 
countries.

    The President's trade agenda has benefited all Americans, but 
especially those most harmed by the failed policies of the last 25 
years. In the decades following the North American Free Trade 
Agreement's (NAFTA) implementation and China's accession to the WTO, 
America lost one in four manufacturing jobs and more than 60,000 
American factories were shut down. Over the last 3\1/2\ years, that 
trend has finally started to reverse. President Trump promised to end 
the disastrous trade deals of the past and put America's workers, 
farmers, ranchers, and businesses first. He has delivered--and will 
continue to deliver--on that promise.

                                 ______
                                 
    Questions Submitted for the Record to Hon. Robert E. Lighthizer
               Questions Submitted by Hon. Chuck Grassley
    Question. In 2010, you testified before the U.S.-China Economic and 
Security Review Commission. You noted that the WTO dispute settlement 
process had shortcomings when it came to China's systemic non-
compliance. Nonetheless, you said ``we should use that process as 
aggressively as possible'' and that ``Congress should give USTR 
additional resources to increase its ability to try and win new 
cases.''

    I thought you were right then, and I think it's still right now. 
Importantly, Congress acted on your advice and has given USTR more 
funds, including the enforcement trust fund.

    Can you tell me if USTR is using that fund to prepare additional 
WTO cases?

    Answer. The administration is committed to using all available 
tools to enforce U.S. rights and ensure that other members are 
complying with their WTO obligations. USTR works every day to do just 
that, supported by the additional funding Congress has provided, 
including through the Trade Enforcement Trust Fund. We evaluate each 
enforcement issue based on the particular facts and circumstances to 
determine the best way forward and will not hesitate to bring offensive 
disputes whenever we consider WTO action to be the most effective way 
to protect U.S. interests.

    Question. There's been a lot of news lately that the administration 
wants to improve trade relations with Brazil. I'm not averse to Brazil 
lowering its high tariffs and eliminating other long-standing trade 
barriers for U.S. exporters. However, I'm concerned that Brazil hasn't 
done enough to address many of these barriers. Moreover, Brazil and the 
United States are competitive producers for a lot of the same goods, 
particularly agricultural goods.

    What's the economic case for focusing on trade with Brazil? Please 
address what, if any, benefits our farmers and ranchers might see.

    Answer. I am mindful of Brazil's high tariffs and other 
longstanding barriers to U.S. products, including regulatory barriers, 
and the keen competition between our agricultural sectors. I have made 
it clear with Brazil that any deal with the United States must be based 
on fairness and reciprocity, and up to the high standards of this 
administration. I also share the vision of President Trump and 
President Bolsonaro for a strong economic partnership. The close 
relationship between President Trump and President Bolsonaro has 
already shown results--last year, Brazil implemented its WTO tariff-
rate quota on wheat, expanding market opportunity for U.S. exports. 
Currently, our work with Brazil is focused on trade rules and 
transparency--areas like trade facilitation, good regulatory practices, 
and anti-corruption--that complement Brazil's economic reforms, cut the 
cost of doing business, and make it easier for U.S. firms to sell U.S.-
produced goods in Brazil.

    Question. The President's 2020 Trade Policy Agenda and 2019 Annual 
Report highlight a lot of problems with India. I'm glad the 
administration is initiating a section 301 investigation into one of 
those problems, its digital tax or the so-called ``equalization levy.'' 
That said, I don't want to forget about the rest of our trade concerns, 
including agricultural market access. I know your team spent a lot of 
time with Indian counterparts in 2019 negotiating those issues.

    What's the status of those negotiations presently, and is it 
realistic to see any outcomes achieved this year?

    Answer. We are in active discussions with the government of India 
in an attempt to address a broad range of Indian trade barriers. We are 
working to secure a trade package that resolves longstanding market 
access issues, including reduction of tariff rates on key U.S. 
agricultural and industrial exports, and to ensure progress in other 
areas, such as intellectual property protection and digital trade. 
While we have made some progress on certain market access issues, India 
has not yet offered a proposal that would adequately address issues to 
warrant GSP reinstatement.

    Question. I'm a strong supporter of reforming the WTO Appellate 
Body, but I'm worried that we still have not made any concrete proposal 
of our own for reforming dispute settlement. A number of allies who 
have been supportive of WTO reform have told me that they are 
discouraged by the continued lack of a proposal from the United States. 
Unfortunately, many of these countries are now signing up for the EU's 
alternative: the Multiparty Interim Arbitration Arrangement.

    I believe we need to do more than identify problems. We need to 
propose and build consensus for solutions that will carry out what 
Congress understood it approved in 1995: binding dispute settlement on 
certain rules carefully negotiated by members, not discovered by 
appointed judges. Accordingly, we need solutions that address overreach 
and other problems like the AB's failure to follow the 90-day rule.

    What efforts are you taking to develop a proposal that we can rally 
our allies around, and will you commit to working with Congress on it--
as is required by the constitution and the law?

    Answer. The administration is committed to working with any 
interested WTO member to find solutions to the failure of the Appellate 
Body to follow WTO rules. This means first understanding what is the 
root of the problem: Why has the Appellate Body consistently broken WTO 
rules--that is, those rules agreed by WTO members in the Uruguay Round 
and approved by the Congress in the Uruguay Round Agreements Act--
despite every effort by U.S. administrations to get it to stop.

    By exercising our right not to approve new members to the Appellate 
Body, the administration has forced the WTO to engage in a long-overdue 
debate on this problem. My office also comprehensively detailed the 
Appellate Body's pervasive rule-breaking in its Report on the Appellate 
Body earlier this year.\1\ The report details the concerns expressed by 
the United States for more than 20 years and the repeated failure of 
the Appellate Body to apply the rules of the WTO agreements in a manner 
that adheres to the text of those agreements. The report also 
highlights several examples of how the Appellate Body has altered WTO 
members' rights and obligations through erroneous interpretations of 
WTO agreements.
---------------------------------------------------------------------------
    \1\ United States Trade Representative, Report on the Appellate 
Body of the World Trade Organization, February 2020, available at: 
https://ustr.gov/sites/default/files/Report_on_the_
Appellate_Body_of_the_World_Trade_Organization.pdf.

    Appellate Body overreaching has unfairly taken away U.S. rights and 
advantaged China. Through a series of deeply flawed reports, the 
Appellate Body has eroded the U.S. ability under WTO rules to 
counteract economic distortions caused by China's non-market practices 
that harm our workers and businesses. For example, the Appellate Body's 
erroneous interpretation of ``public body'' threatens the ability of 
WTO members to counteract trade-distorting subsidies provided through 
state-owned enterprises, favoring non-market economies at the expense 
---------------------------------------------------------------------------
of market economies.

    The dispute settlement system should support, rather than weaken, 
the WTO as a forum for discussion, monitoring, and negotiation. The 
Appellate Body has facilitated efforts by some members to obtain 
through litigation what they have not achieved--and could not achieve--
through negotiation. If WTO members believe in a rules-based trading 
system, then we must ensure the dispute settlement system follows the 
rules that WTO members established. Without understanding the problem 
of why the Appellate Body has not followed the rules members agreed to 
for it, simply writing new rules or affirming the existing rules in 
whatever form will not fix the problem. This is why we have continued 
to insist that members need to understand why the Appellate Body does 
not consider itself bound by the rules so that we can find real, 
lasting solutions.

    Unfortunately, some of our trading partners--prominently, the EU 
and China--continue to deny that the Appellate Body has broken the 
rules. Rather than seeking reform in the areas of concern raised by the 
United States and other WTO members, the EU and China have pursued an 
arbitration arrangement that incorporates and exacerbates some of the 
worst aspects of the Appellate Body's practices. The numerous 
departures from agreed WTO rules in the EU-China arrangement highlight 
a fundamental difference among WTO members: some members prefer an 
appellate ``court'' with expansive powers to write new rules and impose 
new obligations on the United States, instead of the more narrow 
appellate review as agreed to by members in the DSU.

    The United States continues to engage with our trading partners and 
remains committed to working with any WTO member that acknowledges U.S. 
concerns and is willing to work together to find real solutions and 
reform. I look forward to continuing to work with you and the committee 
on these important issues.

    Question. As you know, the GSP and Caribbean Basin preference 
programs expire this year. These preference programs provide certainty 
to American businesses who utilize them to efficiently import parts and 
other inputs to operate their businesses while providing economic 
development for developing countries. Extension of these programs will 
help to provide certainty and liquidity as the U.S. and other countries 
begin the economic recovery from the pandemic. The administration has 
also effectively leveraged these programs to address longstanding trade 
irritants with many of the eligible countries.

    With the expiration of these programs nearing, how do you view the 
renewal of these preference programs as part of a larger strategy 
toward recovery from the pandemic? Additionally, please discuss how we 
can use these programs to achieve our various trade policy objectives, 
including economic development and removing unnecessary trade barriers.

    Answer. This administration has worked, and continues to work, 
within the framework of the Caribbean Basin Trade Partnership Act 
(CBTPA) and the Generalized System of Preferences (GSP) to effectively 
address trade irritants with our Caribbean and GSP trade partners, 
including by securing significant reforms from beneficiary countries on 
labor rights, intellectual property, and U.S. market access. CBTPA and 
GSP also helped strengthen U.S. and beneficiary partners' supply 
chains, which are an important part of global economic development and 
recovery from the pandemic. I look forward to working with you and 
other members of Congress as you consider the legislation reauthorizing 
both CBTPA and GSP.

    Question. In the USMCA implementing bill, Congress provided USTR a 
significant increase in funding. We must continue to assess the 
implications of how it might be effectively and efficiently utilized--
including how it would work in conjunction with the existing trade 
enforcement trust fund.

    I'd like to better understand how USTR intends to utilize this 
sizeable increase in funding.

    Please provide a breakdown on how you intend to utilize the funding 
authorized by USMCA, and what funding has been allocated to date. 
Identify any new positions that will be created; any spending toward 
contractors, or any grants provided to any organizations. Please also 
provide a breakdown of any use of the trade enforcement fund for USMCA 
implementation.

    Answer. USTR plans to hire four new attorneys for USMCA labor 
enforcement and four new attorneys for USMCA environment enforcement. 
USTR is actively soliciting applications specifically for the new USMCA 
environment and labor trade attorney positions on the USTR website, 
Internet job sites, and USAJOBS. The Office of General Counsel (OGC) is 
in the process of interviewing and hiring, and the first new labor 
enforcement attorney will start in August. In the interim, OGC has 
assigned two attorneys (one senior and one junior) for USMCA labor 
enforcement and two attorneys (one senior and one junior) for USMCA 
environment enforcement.

    Actual spending to date on funding authorized by USMCA supplemental 
appropriations has been limited due to the impact of the pandemic. For 
example, USTR has not been able to travel to Mexico City to establish 
the logistics for the USMCA contingent and State Department has 
therefore not determined USTR's share of the various support costs. 
USTR will soon obligate approximately $2.2 million to reimburse the 
detailees from the Environmental Protection Agency, the National 
Oceanic and Atmospheric Administration, and the Fish and Wildlife 
Service through FY 2023. Three USMCA environment trade policy analysts 
and one labor trade policy analyst are now on board, with two labor 
trade policy analysts in the pipeline. As these new hires joined USTR 
within just the last few weeks, personnel costs are minimal to date.

    Question. USTR published its negotiating objectives with Kenya on 
May 22nd, which would allow negotiations to legally start as early as 
next week.

    Can you please provide a general update on these negotiations and 
some insight on how quickly you think these negotiations could be 
completed, including whether it is realistic to expect a deal completed 
by early next year before the expiration of Trade Promotion Authority?

    Answer. On July 8, 2020, Ambassador Lighthizer formally launched 
the U.S.-Kenya FTA negotiations via video conference with his Kenyan 
counterpart, Cabinet Secretary Maina. The first round of negotiations 
via video conference are slated to run through July 22nd. It is 
difficult to predict how quickly the negotiations could be completed; 
President Kenyatta has indicated his hope that we can complete the 
negotiation during his term. We are working to advance the negotiations 
as quickly as possible, though ultimately the substance will drive the 
timing.

    Question. Last October, the U.S. signed an executive agreement with 
Japan to facilitate increased trade between our two countries. For 
agriculture, the first phase of this limited agreement has been 
positive, even though some commodities like rice would still like 
better access to Japan's market.

    Negotiations for stage two of the agreement were supposed to 
commence this spring. What is the status of negotiations with Japan, 
and do you remain committed to pursuing a comprehensive trade agreement 
with Japan as envisaged in your October 16, 2018 letter to Congress?

    Answer. Our negotiations with Japan have been delayed due to the 
coronavirus pandemic, but I expect to start phase-two negotiations with 
Japan in the next few months. The administration is committed to 
negotiating a comprehensive trade agreement as set out in my October 
16, 2018, notification letter to Congress and as outlined in the U.S.-
Japan Trade Agreement Negotiating Objectives published in December 
2018.

                 Questions Submitted by Hon. Ron Wyden
    Question. According to former national security advisor John 
Bolton's recent book, during a dinner between President Trump and 
Chinese President Xi during the December 2018 WTO ministerial in Buenos 
Aires, Trump ``asked . . . for some increases in Chinese farm-product 
purchases, to help with the crucial farm-state vote,'' in exchange for 
``U.S. tariffs would remain at 10 percent rather than rise to 25 
percent, as he had previously threatened.'' Further, during a meeting 
between President Trump and Chinese President Xi at the June 2019 G20 
Summit, Trump ``turned the conversation to the coming U.S. presidential 
election, alluding to China's economic capability to affect the ongoing 
campaigns, pleading with Xi to ensure he'd win.''

    Do you recall President Trump raising farm purchases by China in 
connection with his electoral popularity during meetings with President 
Xi in December 2018 or June 2019?

    Answer. No.

    Question. Did President Trump use the trade negotiations with China 
to seek an electoral advantage? At any time do you recall President 
Trump expressing to a foreign official the importance of Chinese 
purchases of soybeans, wheat, or other agricultural products to Trump's 
electoral interests? If so, please describe.

    Answer. No.

    Question. Important details of the China trade agreement have yet 
to be released. In order to assure the public that the agreement did 
not prioritize agricultural products from electorally important states 
for the benefit of President Trump, please describe how were the 
purchase obligations in subcategories 1 through 23 of the Phase One 
trade agreement determined?

    What relevance did the state of origin or electoral politics play 
in determining these purchase obligations?

    Answer. None.

    Question. Please describe any aspects of the Phase I trade deal 
that were either not recorded in writing or not publicly disclosed, 
including, but not limited to, agreements regarding ZTE, Huawei, North 
Korea, Hong Kong, Uyghur detention and forced labor, private business 
interests, political rivals, or other topics, that influenced the scope 
and tenor of obligations in the Phase One trade deal.

    Answer. The Phase One agreement is a written agreement consisting 
of a preamble and eight chapters. The Phase One agreement is public and 
can be found on the USTR website (https://ustr.gov/sites/default/files/
files/agreements/phase%
20one%20agreement/
Economic_And_Trade_Agreement_Between_The_United_States
_And_China_Text.pdf), with one exception. The one exception involves 
Annex 6.1 to Chapter 6. The public version of Annex 6.1, which can be 
found on the USTR website at the above link, sets forth China's 
commitments to purchase minimum values of U.S. goods and services in 
four broad categories in 2020 and 2021. The confidential version of 
Annex 6.1, which is not public, includes China's additional commitments 
to purchase minimum values of U.S. goods and services in 23 
subcategories that fall within those four broad categories of U.S. 
goods and services.

    Question. Regarding forced technology transfer, China agreed that 
persons shall be able to operate ``without any force or pressure'' from 
China to transfer their technology.

    How has USTR verified China's compliance with this obligation? Are 
there regulations, policies, or other measures that have been revised 
or amended?

    Further, China agreed not to ``support or direct'' outbound foreign 
direct investment activities aimed at acquiring foreign technology in 
sectors targeted by their industrial policy.

    How does USTR intend to determine China's intent when supporting or 
directing outbound investment? For instance, when is an investment 
simply a good deal versus an opportunity to obtain new technology?

    Answer. A key concern identified in USTR's section 301 
investigation was the informal, unwritten actions that China takes to 
force or pressure foreign companies to transfer their technology to 
Chinese entities. Chapter 2 of the Phase One Agreement creates novel, 
binding commitments to address many aspect of China's technology 
transfer regime. The Technology Transfer chapter prohibits China from 
employing a range of acts, policies, and practices to extract 
technology and intellectual property from U.S. companies.

    We continue to closely monitor China's compliance with Chapter 2 
and to work closely with U.S. stakeholders. Specifically, we have 
established a team of trade analysts, economists, lawyers, and China 
subject matter experts that monitors and reviews relevant Chinese 
practices and written measures, as well as information received from 
U.S. stakeholders.

    USTR raises implementation issues with our Chinese counterparts, 
including by using the monthly Designated Officials meetings and the 
quarterly Deputy-level meetings established by the Phase One agreement. 
We will use the enforcement mechanism established by the Phase One 
agreement as necessary and continue to apply duties to encourage China 
to change its harmful behavior.

    With regard to outbound investment, we closely monitor China's 
compliance with respect to its commitments in the Phase One agreement. 
We also work closely with U.S. stakeholders. Our team of trade 
analysts, economists, lawyers, and China subject matter experts 
monitors and reviews Chinese measures, public information, and 
disclosures relating to investments, and information received from U.S. 
stakeholders.

    Question. Given the high level of tariffs currently imposed on 
Chinese goods, and the fact that tariff relief under a Phase Two deal 
does not seem likely in the near term.

    What teeth does the Phase One enforcement mechanism have given that 
it appears to rely on the threat of imposing a tariff-based remedy? If 
this remedy is not tariffs, what is it?

    Answer. The Phase One Agreement's Bilateral Evaluation and Dispute 
Resolution chapter sets forth an arrangement to ensure the effective 
implementation of the agreement and to allow the parties to resolve 
disputes in a fair and expeditious manner. This arrangement creates 
regular bilateral consultations at both the principal level and the 
working level. It also establishes strong procedures for addressing 
disputes related to the agreement and allows each party to take 
proportionate responsive actions that it deems appropriate. The United 
States will continue to monitor vigilantly China's progress in 
eliminating its unfair trade practices and implementing its obligations 
under the agreement.

    Question. In response to concerns that China is undermining Hong 
Kong's autonomy, President Trump announced plans to begin rolling back 
the city's special treatment under U.S. law.

    This process could change U.S. export control, national security 
reviews of investments in the U.S. from Hong Kong, and end treatment of 
the city as a separate customs territory from China, exposing its 
exports to U.S. tariffs on China. What are the next steps in changing 
Hong Kong's status?

    Answer. The administration is taking steps in response to China's 
actions in Hong Kong, including by eliminating policy exemptions that 
give Hong Kong different and special treatment. USTR would also make 
two observations on U.S.-Hong Kong trade relations. First, Hong Kong 
was the 15th-largest U.S. goods export market in 2019, and the United 
States ran the largest goods trade surplus with Hong Kong of any 
trading partner in that year, which was close to $30 billion. Second, 
Hong Kong does not impose any import duties on U.S. products and the 
United States imposes the same rate of Most Favored Nation duties on 
imports of products of Hong Kong and China.

    Question. The Phase One agreement states in Article 7.4 that 
``[t]he Appeal and any information and matters related to it are 
confidential and shall not be shared beyond the Bilateral Evaluation 
and Dispute Resolution Office, absent the agreement of the Parties.'' 
During the Trade Agenda Hearing, Ambassador Lighthizer explained that 
the purpose of this provision was to protect U.S. businesses who have 
shared sensitive information with USTR. While the Phase One agreement 
does at Article 7.3 provide that confidential information need not be 
disclosed to the other party, Article 7.4 appears to prevent the 
existence of an ``Appeal and any information and matter related to the 
Appeal'' to be disclosed beyond the dispute resolution office without 
China's consent.

    Is the United States required to seek China's permission to share 
that an appeal has occurred with members of this committee?

    Answer. Answer: USTR is committed to remain open and transparent 
with members on all relevant information related to the enforcement of 
the Phase One agreement.

    Question. The Phase One agreement with China specifies that 
``[o]fficial Chinese trade data and official U.S. trade data shall be 
used to determine whether this Chapter has been implemented.'' Your 
testimony however suggests that the administration is considering 
compliance based on ``actual sales reports, . . . together with 
exports.''

    Please define ``official Chinese trade data and official U.S. trade 
data.''

    Please explain USTR's methodology for assessing the current level 
of purchases for each of the four categories of purchase obligations in 
the Phase One agreement, as well as the data sources used to make such 
assessments.

    To the extent that data reflecting sales contracts is utilized, 
please explain USTR's methodology for verifying and rectifying any 
failed or refused contracts.

    Please explain USTR's methodology for determining the value of 
exported goods where Chinese government contracting devalues or under-
prices the goods sold.

    Answer. Chapter 6 of the Phase One agreement sets forth China's 
commitments to purchase U.S. goods and services. Article 6.2.6 of 
Chapter 6 provides that ``[o]fficial Chinese trade data and official 
U.S. trade data shall be used to determine whether this Chapter has 
been implemented.'' The Phase One Agreement does not define the terms 
``official Chinese trade data'' and ``official U.S. trade data.''

    Under the Phase One agreement, China's commitments to purchase U.S. 
goods and services are annual commitments for calendar years 2020 and 
2021, so we will not be able to assess definitively whether China has 
fulfilled these commitments for 2020 until official trade data for the 
entire year is published. At the same time, we have been following 
China's progress in purchasing U.S. goods and services very closely and 
have been discussing our concerns with our Chinese counterparts as they 
arise.

    In reviewing China's progress in meeting its Chapter 6 commitments 
relating to manufactured goods, agriculture, and energy, USTR carefully 
analyzes monthly trade data released by the U.S. Department of Commerce 
and the General Administration of Customs of China. In addition, USTR 
works with other U.S. government agencies and the private sector on a 
continual basis to keep abreast of purchases of U.S. goods by Chinese 
entities that do not show up immediately in these data releases, such 
as when a contract has been signed but a shipment will not take place 
until months later. This type of information is especially useful to 
keep abreast of the progress being made by China in sectors like 
agriculture and energy, where it is not unusual for large contracts for 
the purchase of a commodity to be signed with the expectation that 
shipment will not take place until later in the year.

    In reviewing China's progress in meeting its Chapter 6 commitments 
relating to services, USTR carefully analyzes data released by the 
Commerce Department. The Commerce Department releases U.S.-China cross-
border trade in services data on a quarterly basis. The Commerce 
Department releases data on services provided through U.S. affiliates 
in China only on an annual basis.

    While information other than official trade data is useful in 
understanding the progress being made by China during the course of the 
year, the Phase One agreement provides that the assessment of whether 
China has implemented its Chapter 6 commitments in any given year is to 
be based on official Chinese trade data and official U.S. trade data.

    Question. Canada's government control of its dairy market has long 
led to unfair results for U.S. producers. Canada unfairly under-prices 
skim milk ingredients in milk classes 6 and 7 allowing for under-priced 
exports to other markets which compete with U.S. milk products, as well 
as undercutting U.S. products in Canada. In USMCA, Canada committed to 
eliminate milk classes 6 and 7 ``6 months after entry into force,'' and 
ensure these products are classified and priced appropriately based on 
their end use.

    Recognizing that there are some interests in Canada that strongly 
oppose the eliminations of classes 6 and 7, what is USTR doing to make 
sure Canada and its provinces follow through with this commitment?

    Answer. I understand how Canada's classes 6 and 7 dairy pricing 
policies have adversely impacted the U.S. dairy industry. USTR will be 
closely monitoring Canada's implementation of all its dairy 
commitments, and we have conveyed our clear expectations to Canada.

    Question. Enforcement of our trade agreements and follow-through on 
what our trading partners do to hold up their end of the bargain is 
absolutely essential for me. It's how we ensure that what we negotiate 
for on paper, we actually get in practice. One of the hotly contested 
issues during negotiations--and one of the important wins the U.S. 
scored in the ultimate agreement--was on dairy trade with Canada.

    On June 15, 2020, Canada issued new regulations describing its 
updated tariff rate quota (TRQ) administration for dairy products under 
the USMCA. The TRQ regulations specify that large portions of the TRQs 
will be allocated to Canadian ``processors'' who produce competing 
products and have a vested interest in limiting imports of competitive 
products.

    Are Canada's June 15, 2020 TRQ regulations consistent with the text 
of USMCA's TRQ administration obligations?

    What are you doing to make sure Canada's TRQ regulations are 
compliant with USCMA and do not replicate the issues in the EU-Canada 
agreement?

    Answer. A critical component of the market access the United States 
secured in the USMCA is the ability to export U.S. products duty-free, 
under tariff-rate quotas (TRQs) directly to retailers and distributors. 
Such exports maximize profit for U.S. producers and build consumer 
demand for U.S. products in Canada. We remain committed to ensuring 
that Canada does not undermine the value of the market access for the 
United States under the USMCA.

    USTR will be closely monitoring Canada's implementation of all its 
dairy commitments. We are engaging with our Canadian counterparts and 
are ready to take enforcement action through the dispute settlement 
mechanism in the agreement, if necessary.

    Question. The UK Trade Commissioner said that there was a ``shared 
ambition'' to sign a trade agreement before the presidential election 
in November. The second round of talks for this proposed argument only 
just began this week. To sign an agreement in November, USTR would need 
to give Congress notice of an intention to sign by early August and 
release text of the proposed agreement in September under the 2015 
Trade Promotion Authority, leaving only a handful of months to complete 
negotiations. This timeline would be extremely ambitious, especially if 
important areas like the digital services tax are to be addressed.

    Is the UK's trade minister's goal to sign an agreement before the 
U.S. elections a realistic goal--and shouldn't the outcome drive 
timing, not elections?

    Answer. While it is possible that an agreement between the United 
States and the UK could be reached in the next few months, the 
likelihood of that is low. I am more focused on achieving a 
comprehensive agreement that delivers real benefits for American 
workers, farmers, and businesses, rather than achieving a quick deal. 
That said, our teams are working at an accelerated pace, and I am in 
regular discussions with UK Trade Minister Elizabeth Truss. We are 
moving quickly and efficiently, but I will not sacrifice our ambitions 
for speed.

    Question. The World Trade Organization is a critical institution 
for ensuring our trading partners are operating on a level playing 
field. Moreover, as USTR under the last several administrations has 
argued, significant reform and a reinvigorated negotiation process are 
needed. The sudden departure of Director General Azevedo has left the 
institution without critical leadership.

    What characteristics and experience do you view as critical in a 
new Director General, and how will the United States engage in the 
search process?

    Answer. The United States will participate fully in the selection 
process for the new WTO Director General. A strong candidate should 
have knowledge of the WTO, as well as deeply appreciate that the WTO is 
an institution that needs comprehensive reform for it to remain 
relevant and effective.

    Question. The retaliatory tariffs related to the Airbus case are 
scheduled to carousel again on August 12th. Oregon food importers, 
restaurants, and retailers are among the hardest hit businesses by the 
COVID-19 pandemic, and the tariffs that are currently in place aren't 
helping. Oregon wine producers are also hurt by the tariffs when they 
impact their distributors, given the unique organization of the wine 
supply chain. At the same time, we need to get relief for Boeing and 
its workers, which the tariffs on wine are not doing so far.

    What concrete action are you taking to engage with your European 
counterparts and how soon will you come to agreement? If tariffs are 
currently not an effective point of pressure, what other actions are 
you seeking to force compliance?

    Answer. USTR is continuing to press the EU and member States to 
engage in serious negotiations regarding their illegal subsidies to 
Airbus. There is no set timeline for coming to agreement, but USTR will 
continue to act in the manner most likely to bring about resolution of 
this longstanding dispute. Toward that end, USTR has established a 
process where interested persons can submit comments on revising 
existing tariffs, and comments are currently being accepted through 
July 26th. USTR will continue to consider public comments concerning 
potential effects on the U.S. economy when considering any further 
action to take in the investigation.

    Question. The WTO is resuming negotiations on fisheries subsidies, 
which has been one potential bright spot in negotiations in an area of 
critical importance, particularly since it aligns with goals set at the 
United Nations on sustainable developments. I am encouraged that these 
talks are moving forward, though I am also concerned about broad carve-
outs for certain subsidies that continue to be part of the 
conversation.

    What is the United States doing to push these negotiations toward 
an ambitious outcome that applies across to countries across the board? 
What is the likelihood of coming to an agreement before the rescheduled 
WTO ministerial meeting?

    Answer. As the WTO resumes the fisheries subsidies negotiations, 
the United States stands ready to help bring the WTO fisheries 
subsidies negotiations to a successful and meaningful conclusion before 
the rescheduled WTO ministerial meeting, if other members are willing. 
The United States has played a very active role in seeking a meaningful 
outcome. For an outcome to be meaningful, it must change the status quo 
and constrain the largest subsidizers regardless of self-declared 
developing country status. The United States will continue to press for 
strong, clear prohibitions on subsidies for illegal fishing, overfished 
stocks, and fishing in areas beyond a country's own national 
jurisdiction and control, as well as real constraints on the world's 
largest subsidizers.

    Question. For more than a year, this administration blocked 
approval for new Appellate Body members in an effort to draw attention 
to concerns regarding the WTO dispute resolution system. I share these 
concerns, and I want them to be addressed. Last December these concerns 
captured the world's attention when the Appellate Body became unable to 
hear new cases after the retirement of two judges left only one 
remaining judge. The United States has yet to put forward a reform 
proposal despite opposing other WTO members' reform suggestions.

    What are the next steps in addressing the problems at the WTO?

    Answer. The administration is committed to working with any 
interested WTO member to find solutions to the failure of the Appellate 
Body to follow WTO rules. This means first understanding what is the 
root of the problem: Why has the Appellate Body consistently broken WTO 
rules--that is, those rules agreed by WTO members in the Uruguay Round 
and approved by the Congress in the Uruguay Round Agreements Act--
despite every effort by U.S. administrations to get it to stop.

    By exercising our right not to approve new members to the Appellate 
Body, the administration has forced the WTO to engage in a long-overdue 
debate on this problem. My office also comprehensively detailed the 
Appellate Body's pervasive rule-breaking in its Report on the Appellate 
Body earlier this year.\2\ The report details the concerns expressed by 
the United States for more than 20 years and the repeated failure of 
the Appellate Body to apply the rules of the WTO agreements in a manner 
that adheres to the text of those agreements. The Report also 
highlights several examples of how the Appellate Body has altered WTO 
members' rights and obligations through erroneous interpretations of 
WTO agreements.
---------------------------------------------------------------------------
    \2\ United States Trade Representative, Report on the Appellate 
Body of the World Trade Organization, February 2020, available at: 
https://ustr.gov/sites/default/files/Report_on_the_
Appellate_Body_of_the_World_Trade_Organization.pdf.

    Appellate Body overreaching has unfairly taken away U.S. rights and 
advantaged China. Through a series of deeply flawed reports, the 
Appellate Body has eroded the U.S. ability under WTO rules to 
counteract economic distortions caused by China's non-market practices 
that harm our workers and businesses. For example, the Appellate Body's 
erroneous interpretation of ``public body'' threatens the ability of 
WTO members to counteract trade-distorting subsidies provided through 
state-owned enterprises, favoring non-market economies at the expense 
---------------------------------------------------------------------------
of market economies.

    The dispute settlement system should support, rather than weaken, 
the WTO as a forum for discussion, monitoring, and negotiation. The 
Appellate Body has facilitated efforts by some members to obtain 
through litigation what they have not achieved--and could not achieve--
through negotiation. If WTO members believe in a rules-based trading 
system, then we must ensure the dispute settlement system follows the 
rules that WTO members established. Without understanding the problem 
of why the Appellate Body has not followed the rules members agreed to 
for it, simply writing new rules or affirming the existing rules in 
whatever form will not fix the problem. This is why we have continued 
to insist that members need to understand why the Appellate Body does 
not consider itself bound by the rules so that we can find real, 
lasting solutions.

    The United States continues to engage with our trading partners and 
remains committed to working with any WTO member that acknowledges U.S. 
concerns and is willing to work together to find real solutions and 
reform. I look forward to continuing to work with you and the committee 
on these important issues.

    Question. When I went back to Oregon after USMCA was passed, along 
with Oregon dairy producers, labor stakeholders, and service and 
manufacturers, I stood with a truly amazing Oregon entrepreneur--
Rebecca Alexander. She founded AllGo, an online community for plus-size 
people that relies on user-generated content--like reviews, comments 
and photos--for its very existence. She created a truly special online 
space for people that all too often marginalized and unfairly censored. 
In the U.S., we thankfully have a system where her platform and others 
can create spaces for people that the established platforms cannot or 
will not serve. That is the type of business that I want to support and 
export to the rest of the world. Including limitations on liability in 
our trade agreements is key to that.

    These protections have been in U.S. law since 1996. Can you tell me 
why you thought it was high time we reflected it in trade agreements?

    Answer. We agree that a provision addressing the non-IP civil 
liability of interactive computer service suppliers can play an 
important role as an element of comprehensive, high standard digital 
trade rules designed to facilitate the continued growth of the U.S. 
economy and to support innovative Internet-based business models like 
the business that you have described. At the same time, we recognize 
that such provisions must provide flexibility for the Congress, the 
administration, and our negotiating partners to evolve policy and law 
in response to new challenges.

    Question. The final outcome of the USMCA, after modifications were 
made to reflect the priorities of congressional Democrats, takes into 
account the need for a balance between support for innovation in the 
development of new pharmaceutical treatments and the promotion of 
access to medicines through greater generic competition. Certain 
aspects of U.S. law reflect this principle, and recent events have 
underscored its importance.

    Will the United States follow a balanced approach in its 
negotiations for a free trade agreement with the United Kingdom, given 
the large bipartisan support for the final USMCA outcome?

    Answer. We intend to follow the principal negotiating objectives 
under the Bipartisan Congressional Trade Priorities and Accountability 
Act of 2015, which calls on USTR to seek standards similar to those 
found in U.S. law. At the same time, I look forward to engaging with 
members of Congress on any particular issues of concern.

    Question. Our trade relationship with India has been challenging 
for years, but is facing even greater challenges in the last year, 
between retaliatory tariffs on products important to the Northwest and 
the new digital tax and protectionist data flows measures. India has 
also been a hurdle to making progress at the WTO on fisheries subsidies 
negotiations and a range of other issues. There are reports that you 
are reengaging with Indian officials this week to take up the prospect 
of a deal to resolve certain trade issues--which seem to be only 
multiplying. I share the ambition for advancing the relationship with 
India so that we can address both old and new issues.

    Are you addressing the new protectionist measures India has imposed 
in the last year, in addition to other longstanding issues?

    Answer. India has a long history of protectionism and recent 
policies enacted by India, including those related to digital economy, 
continue to be trade restrictive. We are in active discussions with the 
government of India in an attempt to address a broad range of Indian 
trade barriers that would expand market access, including reduction of 
tariffs on key U.S. agricultural and industrial exports, and to ensure 
progress in other areas, such as intellectual property protection and 
digital trade. While we have made some progress on key market access 
concerns, we are still working to achieve a package that is equitable 
and adequately addresses relevant trade barriers to ensure India meets 
the GSP eligibility criteria. We have also separately launched a 
section 301 investigation into India's digital services tax and are 
relaunching our efforts on intellectual property rights through the 
Trade Policy Forum's High Level Working Group on Intellectual Property.

    Question. The European Union continues to use geographical 
indications to deny fair market opportunities for our agricultural 
products--not only in the EU, but wherever the EU can convince others 
to copy its system. We need a more robust approach to dealing with this 
type of non-tariff trade barrier so that we can effectively tackle it 
and preserve export opportunities for our ag products. USMCA broke some 
new ground, particularly with the side letters negotiated with Mexico 
on this issue. That was a good first step, rather than a great final 
landing spot. Moreover, this problem is growing rapidly thanks to EU 
policies proliferating around the world.

    What are you doing through FTA and other trade discussions to nail 
down commitments from our trading partners that they will not block our 
exports that use everyday food terms widely used by American companies?

    Answer. The United States continues its intensive engagement in 
promoting and protecting access to foreign markets for U.S. exporters 
of products that are identified by common names. The United States is 
advancing these objectives through its free trade agreements by seeking 
provisions that ensure trading partners are committed to the principles 
of procedural fairness and transparency and that help to maintain 
market and promote access for U.S. producers. In addition to these 
negotiations, the United States is engaging bilaterally to address 
concerns resulting from the GI provisions in existing EU trade 
agreements, agreements under negotiation, as well as other initiatives.

    Question. The United Kingdom will soon be free to move away from 
the many protectionist practices of the European Union that have 
created such an imbalance in agricultural trade across the Atlantic. 
But the UK remains under pressure from the EU to continue to align its 
food safety practices with the EU's non-scientific, overly burdensome 
approach to agricultural trade. That's a huge problem since those 
existing EU policies have led to a deep Transatlantic dairy trade 
imbalance of over 10 to 1.

    How do we use those UK negotiations to strip away the current 
protectionist, red-tape model to governing dairy and other agricultural 
trade, and put in place more reasonable requirements that allow us to 
sell our safe and high-quality products to that major import market?

    Answer. During negotiations with the UK, we will be seeking for the 
UK to make independent decisions regarding food safety, animal health, 
and plant health, based on science and risk analysis, and not maintain 
EU regulations that limit market access for U.S. agricultural products.

    Question. The USMCA is scheduled to enter into force on July 1st. 
As the Mexican legislature and executive branch rush to implement the 
agreement, more questions are being raised as to whether it will be in 
compliance with the agreement on day one on a range of issues, 
including the treatment of low-value customs entries, discriminatory 
advertising limitations for pay-TV, and sanitary and phytosanitary 
measures, to name a few. Section 106(a)(1)(G) of the Bipartisan Trade 
Priorities and Accountability Act of 2015 and section 101(b) of the 
USMC Implementation Act require USTR to find that our trading partners 
have ``taken measures necessary to comply with those provisions of the 
agreement that are to take effect on the date on which the agreement 
enters into force'' before allowing the agreement to take effect. In 
the past, this requirement has been used as leverage to prod trade 
partners to make necessary changes to come into full compliance. The 
President provided this notice despite known deficiencies, and the 
signals out of Mexico about their posture toward important obligations 
and principles in the agreement have become alarming with the arrest of 
Mexican labor lawyer Susana Prieto Terrazas.

    How do you plan to promptly address these and any other 
deficiencies in Mexico's compliance?

    Answer. The administration is committed to ensuring that Mexico 
complies with its obligations under the USMCA. We continue to engage 
with Mexican officials at high levels and will be monitoring Mexico's 
implementation of the Agreement closely. If we are unable to resolve 
our concerns, however, we are prepared to take enforcement actions to 
hold Mexico to its obligations under the agreement.

    Question. The inclusion in USMCA of the Rapid Response Mechanism, 
that I worked on with Senator Brown and others, has the potential to be 
a game-changer for our trade relationship with Mexico, and a template 
for future agreements. It allows the United States to target imports 
from bad-actor facilities that fail to uphold worker rights. Together 
with tough obligations in the agreement and state-to-state enforcement, 
it can bring about real on-the-ground improvements for Mexican workers, 
which will put our workers on a more level playing field. But this 
depends on the U.S. government actively pursuing these mechanisms.

    On June 30, 2020, USTR published guidelines for the submission of 
petitions and other information to bring actions under the rapid 
response mechanism and the labor chapter. How will USTR apply the 
guidelines to ensure rigorous enforcement of the labor obligations in 
the chapter?

    How will USTR work with the Department of Labor to ensure that 
submissions to the USMCA hotline are fully taken into account in 
enforcement actions?

    Answer. The interim procedural guidelines, published by USTR on 
behalf of the USMCA Interagency Labor Committee (ILC), follow the 
process and aggressive timeline established by the USMCA Implementation 
Act. Information regarding labor issues among the USMCA countries may 
be submitted confidentially to the hotline. As co-chairs of the ILC, 
USTR and the Department of Labor intend to work together closely to 
ensure enforcement of USMCA labor obligations. As I stated during my 
hearing before your committee, we will not hesitate to utilize the 
USMCA's enforcement tools.

    Question. The USMCA Implementation Act included funding to ensure 
that USTR has the capacity, personnel, and resources to monitor 
compliance with USMCA environmental obligations and pursue enforcement 
actions if necessary. The bill included $20 million over 4 years for 
the Interagency Environment Committee to support, among other things, 
up to three details to the U.S. Embassy in Mexico from the Fish and 
Wildlife Service (FWS), Environmental Protection Agency (EPA), and 
National Oceanic and Atmospheric Administration (NOAA). The bill also 
included $40 million over 4 years for USTR's environmental enforcement 
efforts.

    What additional capacity, personnel, or resources has USTR added--
or does USTR intend to add--with these funds? Have FTEs been detailed 
to the U.S. embassy in Mexico, as authorized by the Act?

    Answer. USTR has worked closely with the U.S. Environmental 
Protection Agency, the Department of Interior's Fish and Wildlife 
Service, and the National Oceanic and Atmospheric Administration to 
identify one expert from each agency to be detailed to USTR and 
subsequently placed in the U.S. Embassy in Mexico City, Mexico. Two of 
the attaches have begun onboarding with USTR and the third is in 
process. USTR also created a Senior Trade Representative position in 
Mexico City, whose primary role is to coordinate and enhance the work 
of the labor and environment attaches in Mexico City, and more 
generally to ensure robust monitoring and enforcement of the USMCA. 
USTR and the relevant agencies are endeavoring to relocate these 
officials to Mexico City as soon as possible. Placement in Mexico has 
been delayed due to the pandemic, however work by the attaches will 
begin in the interim.

    USTR's Office of Environment and Natural Resources has three 
additional staff to support the work of the Interagency Environment 
Committee (IEC) and USTR's enhanced USMCA monitoring and enforcement 
efforts. USTR's Office of General Counsel has assigned two attorneys to 
work specifically on USMCA Environment and is actively soliciting 
applications specifically for new environment trade attorney positions.

    USTR continues to work with the IEC agencies, including CBP, EPA, 
NOAA, FWS, and DOJ, to identify opportunities to enhance monitoring and 
enforcement of USMCA environment obligations, such as increased 
staffing or improved technology to better target shipments of illegally 
harvested flora and fauna between the United States, Mexico, and 
Canada.

    Question. USMCA includes an updated Agreement on Environmental 
Cooperation that, among other things, lays out a framework for the 
governments of Mexico, Canada, and the United States to engage in 
strategic collaboration on environmental issues that affect North 
America, including building low-emission, resilient economies; 
combating illegal logging, fishing, and trafficking of wildlife; and 
promoting sustainable fisheries management.

    Has USTR identified, or worked with EPA to identify, any issues on 
which the administration intends to engage with Mexico and Canada 
pursuant to the Agreement on Environmental Cooperation?

    Answer. The updated Environmental Cooperation Agreement (ECA) 
identifies EPA as the U.S. lead in the Council for Environmental 
Cooperation. USTR worked with EPA to negotiate and agree to strategic 
priorities for North American environmental cooperation, aligned with 
the environmental obligations agreed in USMCA Chapter 24 and the ECA. 
The 2021-2025 Strategic Plan for the Commission for Environmental 
Cooperation includes as priorities: (1) clean air, land, and water; (2) 
preventing and reducing pollution in the marine environment; (3) 
circular economy and sustainable materials management; (4) shared 
ecosystems and species; (5) resilient economies and communities; and 
(6) effective enforcement of environmental laws.

    The Interagency Environment Committee for Monitoring and 
Enforcement, led by USTR, is facilitating collaboration among agencies 
that received USMCA supplemental appropriations to ensure that 
cooperative activities are coordinated. USTR is also supporting 
targeted environmental cooperation to strategically address areas of 
concern related to Mexico's implementation of its USMCA environment 
obligations.

    Question. According to USTR's website, a limited agreement between 
the United States and Japan entered into force on January 1, 2020, and 
that ``the United States and Japan intend to conclude consultations 
within 4 months after the date of entry into force of the United 
States-Japan Trade Agreement and enter into negotiations thereafter in 
the areas of customs duties and other restrictions on trade, barriers 
to trade in services and investment, and other issues in order to 
promote mutually beneficial, fair, and reciprocal trade.''

    Have Phase Two negotiations with Japan commenced? When do the 
United States and Japan intend to resume these discussions?

    Answer. Our negotiations with Japan have been delayed due to the 
coronavirus pandemic, but I expect to start phase-two negotiations for 
a comprehensive trade agreement with Japan, as outlined in the U.S.-
Japan Trade Agreement Negotiating Objectives published in December 
2018, in the next few months.

    Question. COVID-19 has shown the dependence of our Nation on 
innovation to secure our futures and save lives. Today, we are counting 
on science and technology to enable ordinary Americans to keep working 
safely, see the doctor, and get all the other goods and services they 
need in their everyday lives.

    Do you agree that the deals you are pursuing with the UK, Japan, 
and other countries must, at minimum, include comprehensive, high 
standard rules to protect and promote the science, technology, and 
innovation that we are depending on to get through the current crisis?

    Answer. Fostering innovation and creativity is essential to U.S. 
economic growth, competitiveness, and the estimated 45 million American 
jobs that directly or indirectly rely on IP-intensive industries. To 
promote innovation, including the research and development of cutting-
edge treatments and cures required by the current crisis and in the 
future, USTR engages with trading partners to ensure that U.S. owners 
of IP have a full and fair opportunity to use and profit from their IP. 
In our FTA negotiations, we will follow the objectives set forth by 
Congress in the Bipartisan Congressional Trade Priorities and 
Accountability Act of 2015, including seeking a standard of protection 
similar to that found in U.S. law.

                                 ______
                                 
                 Questions Submitted by Hon. Mike Crapo
    Question. I support the United States-Mexico-Canada Agreement 
(USMCA), and I am glad that we are now nearing its implementation. I 
applaud the administration for its hard work in getting that deal done.

    An important benefit of the agreement is the new access it granted 
to the highly protected Canadian dairy market for U.S. producers, as 
well as the new rules it put in place to quell the type of trade-
distorting practices Canada had used to keep our dairy products out. To 
that end, I am concerned that Canada is already working to undermine 
the agreement with its June 15, 2020, tariff-rate quota allocation 
announcement.

    What steps has USTR taken to date to ensure that Canada holds up 
its end of the agreement on dairy market access? I would like to know 
more about what we are doing to make sure their commitments are fully 
realized as we near the agreement's entry into force date.

    Answer. USTR will be closely monitoring Canada's implementation of 
all its dairy commitments. We are engaging with our Canadian 
counterparts and are ready to take enforcement action through the 
dispute settlement mechanism in the agreement, if necessary.

    Question. The COVID-19 pandemic has created economic uncertainty 
and challenges for many businesses in Idaho and across the country. 
Coronavirus has impeded the efforts of many of these companies to shift 
their supply chains away from China and, as a result, they now need 
more time to do so. I have heard from stakeholders asking for an 
automatic extension of existing exclusions to help American businesses 
stay afloat and allow workers return to work during this critical 
period. USTR just finished processing List 3 exclusion requests in May, 
with an acceptance rate of just 4.9 percent, and they expire in August.

    Is USTR currently considering an automatic extension of previously 
approved exclusions from the section 301 tariffs on imported goods from 
China? These exclusions are important to the many U.S. businesses and 
consumers that are suffering from the effects of the COVID-19 outbreak 
that has upended global supply chains.

    Answer. USTR is not considering automatic extension of previously 
approved exclusions. Rather, prior to a group of exclusions expiring, 
USTR has issued a Federal Register notice asking the public to comment 
on whether to extend these particular exclusions for up to 1 year. 
Currently, USTR has several extension dockets open covering multiple 
tranches of exclusions from multiple lists.

                                 ______
                                 
                Questions Submitted by Hon. Pat Roberts
    Question. The EU's approach to pesticide regulation is based on the 
precautionary principle rather than risk assessment. This policy has a 
global effect on agricultural trade, forcing U.S. farmers to choose 
between preserving export markets and continuing to use safe and 
effective crop protection products. The recent Farm to Fork strategy 
could force countries around the world to adopt these policies.

    How is the administration addressing this threat to U.S. 
agricultural production?

    Answer. We are committed to ensuring fair treatment of U.S. 
agricultural exports by our trading partners. Discontinuing the use of 
critical substances without a proper science-based risk assessment to 
provide justification would have serious adverse effects on 
agricultural productivity and global markets. USTR shares your concerns 
that the EU's hazard-based pesticide policy could harm not only U.S. 
producers, but also could keep safe, modern, innovative tools and 
technologies from farmers worldwide. As we continue engaging with the 
EU, we are seeking to address a wide array of non-tariff and SPS 
barriers, including EU pesticide policy. More broadly, USTR also 
participates actively in the WTO Committees on Sanitary and 
Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT) to 
raise concerns regarding any potentially unjustified standards-related 
measures maintained by our trading partners.

    Question. China's current pesticide legislation requires studies 
supporting pesticide registration in China to be conducted in China, 
with no provision to recognize studies conducted in other countries 
under internationally recognized Good Laboratory Practice (GLP) 
Standards. Collaboration between China's Ministry of Agriculture and 
Rural Affairs (MARA) and USTR, USDA and EPA under the Phase One 
agreement can help encourage China's participation in the international 
agreement on Mutual Acceptance of Data (MAD) conducted according to 
those GLP Standards. This will facilitate registration by U.S. 
companies (and others) of pesticide products in China, with benefits 
for international trade.

    How can this issue be addressed in the Phase One agreement?

    Answer. Under the Agriculture Chapter of the Phase One agreement, 
China stated its intention to engage in cooperative discussions related 
to agricultural pesticides, including registration data and pesticide 
trial data. The EPA and China's Institute for Control of Agrochemicals, 
Ministry of Agriculture (ICAMA) have a positive history of working 
together on technical issues related to pesticides. In the future, 
USTR, USDA, and EPA plan on re-engaging with ICAMA to discuss the 
establishment of import tolerances and maximum residue levels for 
pesticides. USTR, USDA, and EPA agree on the importance of encouraging 
China to accept field trial data produced outside China.

    Question. Ambassador Lighthizer, I wanted to follow up regarding 
your comments on non-science based, i.e., precautionary principle, 
actions Mexico has taken on both crop protection products and seed 
traits. U.S. producers and agribusiness companies are deeply concerned 
with both these topics. It has been my understanding that you are 
looking at filing a case under the USMCA dispute resolution process on 
both crop protection and seeds. In your response, you addressed 
concerns with both, but your answer also made it appear you were only 
looking at a case for seed.

    Are you looking to address these important issues for both crop 
protection and seeds under the dispute resolution process?

    Answer. Biotech products are of key economic importance to U.S. 
farmers, and I share your concern with respect to Mexico's treatment. 
We continue to engage with Mexican officials at high levels to address 
our concerns. If we are unable to resolve our concerns, we are prepared 
to take enforcement actions to hold Mexico to its obligations under the 
agreement, if necessary.

    Question. Ambassador Lighthizer, I understand that both U.S. and 
foreign-based crop protection companies are experiencing delays on 
several dozen product registrations and label changes in Vietnam. 
Vietnam will not accept data from laboratories in the United States 
even though they follow internationally recognized good laboratory 
practices (GLP). Vietnam accepts GLP data from almost all other 
countries. This is placing GLP labs based in the United States, along 
with U.S. based companies that tend to generate more data in the United 
States, at a distinct disadvantage with competitors around the world.

    What is USTR and the U.S. Government doing to address this issue 
with Vietnam?

    Answer. We are aware of the concern regarding delays in Vietnam's 
review and approval of crop protection product registration dossiers 
from both U.S. and foreign-based companies. In addition, we are 
concerned that Vietnam does not recognize U.S. laboratories conducting 
the toxicology tests as GLP-certified laboratories, even though the 
labs are recognized by the OECD. The U.S. government, including USTR 
and USDA, has been engaging with representatives from crop protection 
companies in the United States and Hanoi and the Vietnamese Government 
and will continue to urge Vietnam to address this issue.

    Question. The European Union has long imposed unscientific barriers 
that have both restricted trade and limited commercial opportunities 
here in the United States. The biotechnology approval process, for 
example, has been plagued by political interference from the beginning. 
We hear positive statements from this new European Commission about 
wanting to have a trade agreement with the United States, but the EU 
has shown time and time again that they won't uphold commitments in 
their existing agreements or follow their own law. Most recently, we've 
seen this new commission repeatedly cancel the critical monthly 
meetings needed to advance biotechnology applications to approval and 
is likely to cancel the upcoming July meeting. This could hold up the 
commercialization of products here in the United States. It is 
imperative that any trade agreement with the EU build upon the SPS 
agreement and include disciplines on the approval process for 
biotechnology.

    Could you please tell us what the current state of the U.S.-EU 
trade discussions is and if the new commission intends to address these 
longstanding systemic issues that needlessly restrict U.S. farmers' 
access to technology?

    Answer. We share your concerns regarding the commission's actions 
to cancel the monthly member state committee meetings necessary to 
advance biotechnology applications to approval. Indeed, the commission 
recently canceled the meeting previously scheduled for July 10, 2020. 
There are currently 13 applications of importance to U.S. trade 
interests that are pending action by the standing committee responsible 
for biotechnology, two of which have been in the EU approval system for 
over a decade. We continue to convey these concerns, as well as other 
concerns regarding systemic burdens and delays in the EU biotech 
approval process, to the EU, including in the U.S.-EU trade talks.

    Question. I am very encouraged by negotiations moving forward on a 
free trade agreement with the United Kingdom. While historical 
differences in agricultural policies have been challenging to come to a 
consensus on with European countries, I see a great deal of opportunity 
in forging a strong framework for agricultural trade with the UK.

    How have these discussions been progressing, especially as it 
relates to strong, science-based policies for food and agriculture?

    Answer. The foundation of the U.S.-UK discussions with respect to 
sanitary and phytosanitary measures (SPS) has focused on the critical 
importance of countries meeting their WTO commitments to base SPS 
standards on science and risk assessment.

    Question. While China announced in February that it would allow an 
exemption from the section 301 counter-tariffs applied to U.S. ethanol, 
there continues to be an effective tariff rate of 45 percent on the 
product as a result of the section 232 countermeasures, and other 
import tariffs currently being applied by China.

    How do we work to enforce compliance with Phase One with regard to 
products like ethanol, where import tariffs persist to make the U.S. 
product uncompetitive in China?

    Answer. China currently maintains an MFN tariff of 30 percent and a 
section 232 retaliatory tariff of 15 percent on imports of U.S. 
ethanol. Up until 2016, China imposed an applied tariff of 5 percent, 
which had facilitated record exports of U.S. ethanol to China. However, 
in 2017, the applied tariff was raised to 30 percent. China's 
commitments to purchase U.S. food and agricultural products are annual 
commitments for calendar years 2020 and 2021, so we will not be able to 
assess definitively whether China has fulfilled these commitments for 
2020 until the end of this year. At the same time, we have been 
following very closely China's progress in purchasing U.S. food and 
agricultural products and have been discussing our concerns with our 
Chinese counterparts as they arise. We have made it clear that China 
needs to find a way to satisfy all of its purchases commitments under 
the Phase One agreement.

                                 ______
                                 
                Questions Submitted by Hon. John Cornyn
    Question. I was proud to work with Senator Warner and other 
colleagues to introduce the CHIP for America Act last week. The bill 
aims to restore semiconductor manufacturing in American, secure supply 
chain, create American jobs and ensure long-term national security. In 
the meantime, it is also important to engage our global allies and 
partners to address threats to the global supply chain in semiconductor 
industry. Taiwan is a trustworthy partner that supplies top American 
companies, including my home State, with advanced-technology 
intermediate goods. Taiwan's leading semiconductor manufacturer just 
announced its plan to build and operate an advanced fab in the United 
States last month. Taiwan has expressed its strong interest in a high-
standard trade deal with the United States, which I believe would 
further economic and trade relations between our two countries.

    Would you consider Taiwan as a good candidate and prioritize a 
possible U.S.-
Taiwan FTA?

    Answer. The trade and investment relationship between the United 
States and Taiwan is an important one. We are focused on continuing to 
build a strong bilateral relationship with Taiwan. However, we still 
face longstanding trade barriers that restrict market access for U.S. 
beef and pork products, despite previous commitments by Taiwan to fix 
these problems. Resolving these issues will be critical to deepening 
our trade and investment relationship with Taiwan.

    Question. As the world economy begins to recover and reopen 
following the public health-forced shutdowns due to the COVID-19 
pandemic, what is your perspective and outlook for the Phase One 
agreement with China, and specifically as it relates to the 
agricultural purchase commitments by China? As you know, given the 
significance of China as a global importer and user of cotton, and the 
current economic distress being felt by U.S. cotton producers and 
others in the U.S. cotton supply chain, it is critical to maintain a 
robust level of cotton exports.

    What are your expectations for China to fulfill its commitments in 
Phase One for agricultural purchases generally and for cotton and 
cotton yarn specifically?

    Answer. With regard to its commitments to purchase U.S. food and 
agricultural products, China got off to a slow start at the beginning 
of this year, but we have seen significant purchases over the last 
several weeks. With regard to cotton, from January to May 2020, China 
imported $440 million of U.S. cotton. While this level is behind 
China's import level for the 2017 baseline period, China continues to 
make large purchases of new crop cotton that are being reported by the 
USDA Export Sales Report on a weekly basis. China's commitments to 
purchase U.S. food and agricultural products are annual commitments for 
calendar years 2020 and 2021, so we will not be able to assess 
definitively whether China has fulfilled these commitments for 2020 
until the end of this year. At the same time, we have been following 
China's progress in purchasing U.S. food and agricultural products very 
closely and have been discussing our concerns with our Chinese 
counterparts as they arise. We have made it clear that China needs to 
find a way to satisfy all of its purchases commitments under the Phase 
One Agreement.

    Question. The Treasury Department has jurisdictional authority over 
Customs and Border Protection's (CBP) Federal Excise Tax (FET) deferral 
guidelines for beverage alcohol for U.S. importers. The Interim Final 
Rule (IFR) announced on April 20, 2020, allowing for a 90-day deferral 
of FET payments, however, was significantly different than the domestic 
deferral guidelines that the Alcohol and Tobacco Tax and Trade Bureau 
(TTB) issued for domestic producers on March 31, 2020. In fact, CBP 
required restrictive hardship tests, while TTB did not.

    What is Treasury's rationale for the inequity created between TTB's 
and CBP's FET deferral guidance given that the Department oversees 
both?

    Further, given that bipartisan members of Congress have sent 
numerous letters to Treasury on this very topic, will the Department 
work to rectify the inequity between the two deferral regimes in a 
timely manner so as not to put U.S.-based importers at a disadvantage?

    Answer. I would advise these questions be addressed to Secretary 
Mnuchin, who is better-suited to answer questions about the Department 
of the Treasury.

    Question. During the ongoing health and economic crisis of the 
COVID-19 pandemic, small and medium-sized businesses across the country 
state they are being severely harmed by the section 301 tariffs while 
trying to support their workforce during the pandemic.

    Will USTR consider deferring the tariffs or providing more relief 
for these businesses while they mitigate the harm of the pandemic?

    Answer. We are aware of the severe economic effect of the COVID-19 
crisis on small and medium-sized businesses and want to do what we can 
to speed their recovery. At the same time, as envisioned by the section 
301 statute, we continue to apply section 301 tariffs to China in order 
to obtain the elimination of China's practices that cause severe 
economic harm to U.S. interests, and in the long term, will undermine 
the competitiveness of the U.S. economy. We also have a process for 
granting exclusions in which exclusions may be granted for products 
needed to respond to the pandemic.

    Question. USTR has only provided exclusions for products under List 
4A, largely consisting of consumer goods, until September 1st, and 
extended certain exclusions under Lists 1-3 only until the end of 2020.

    What is USTR's plan to extend these exclusions so as to not harm 
businesses and consumers while they mitigate the harm of the COVID-19 
pandemic this year?

    Answer. USTR recently issued a Federal Register notice asking for 
public comment on whether to extend, for up to 1 year, the initial 
tranches of exclusions for product under List 4A. USTR plans to issue a 
second Federal Register notice in the coming weeks for comment on the 
remaining tranches of exclusions issued under List 4A. At this time, 
USTR has not decided whether to possibly extend again the exclusions 
extended until the end of 2020.

    Question. Because of the extensive damage that the global pandemic 
has had on U.S. companies and employment, has the administration 
considered reducing section 232 tariffs or postponing collections of 
section 232 tariffs in order to help businesses survive?

    Answer. The President imposed tariffs on steel and aluminum imports 
under section 232 because he determined that steel and aluminum 
articles are being imported into the United States in such quantities 
and under such circumstances as to threaten to impair the national 
security of the United States. I am not aware that present 
circumstances have changed this determination.

    Question. What is the current timeline for a trade deal with the 
UK? Has COVID-19 and the upcoming election had an effect on the 
administration's willingness to reach a trade deal with the UK?

    Answer. We are about to begin a third set of intensive negotiating 
sessions with the United Kingdom at the end of July. Our teams have 
been moving at an accelerated pace and the discussions so far have 
successfully taken place virtually due to COVID-19. We have never set a 
deadline for the conclusion of the negotiations, but while our intent 
is to move as quickly as possible, I am more focused on achieving an 
ambitious and comprehensive agreement that delivers real benefits for 
American workers, farmers, and businesses, rather than achieving a 
quick deal.

    Question. Some are growing concerned that certain companies are 
shuttering U.S. plants and taking advantage of Mexico's 232 exclusions 
on steel. One such company appears to be shifting its production of oil 
country tubular goods (OCTG) from plants in the U.S. to Mexico and has 
laid off more than 900 Americans, including 220 in Texas.

    What, specifically, is the administration's plan to prevent this 
kind of situation in the steel industry?

    Answer. The President exempted Mexico from the tariffs he imposed 
under section 232 on the basis of a clear understanding that imports of 
steel and aluminum from Mexico will remain at historical levels. The 
administration is closely monitoring imports from Mexico, including 
imports of OCTG, to identify potential import surges. When imports have 
exhibited sustained increases, USTR has raised the issue immediately 
with Mexico. In the event that imports of these products surge 
meaningfully beyond historic volumes of trade over a period of time, 
the agreement we concluded with Mexico provides that the United States 
can re-impose the section 232 tariffs on affected products. The 
administration is fully committed to ensuring that imports from 
countries exempt from the tariffs do not undermine the national 
security objectives of such tariffs.

    Question. It is no secret that China continues to pose serious 
threats to U.S. national and economic security, while largely closing 
or conditioning access to its own domestic market to American 
companies. One such example of this is cloud services. U.S. cloud 
providers are some of the world's leading innovators, providing 
millions of high-skilled and high-wage jobs. While U.S. cloud providers 
have been at the forefront of the movement to the cloud in virtually 
every country in the world, China has blocked them. China requires U.S. 
cloud providers to transfer valuable U.S. intellectual property, 
surrender use of their brand names, and hand over operation and control 
of their business to a Chinese company in order to operate in the 
Chinese market. Chinese cloud providers are free to operate and compete 
in the U.S. market, and U.S. CSPs should benefit from the same 
opportunity in China. I strongly believe that it is important for the 
U.S. government to prioritize this issue in any potential Phase Two 
China deal.

    Can you please provide an update on China's Phase One purchase 
commitment regarding cloud services, and also commit that addressing 
market access in China for U.S. cloud service providers will be a 
priority issue in any Phase Two negotiation?

    Answer. Under Chapter 6 of the Phase One agreement, China committed 
to increase its purchases of U.S. cloud and related services 
substantially in 2020 and 2021. USTR continues to track China's 
implementation of its services purchases commitments very closely. 
Official U.S. trade data for the first three months of 2020 indicates 
that China is making good progress in fulfilling its commitments as 
they relate to the cross-border supply of cloud and related services.

    This administration remains very concerned about China's lack of 
reciprocity in opening its cloud services market. The United States 
anticipates that the Phase Two negotiations with China will include a 
focus on services market access issues that were not addressed in the 
Phase One agreement, including in the area of cloud services.

    Question. As you know, the U.S. Foreign-Trade Zones Program was 
established during the Great Depression to allow U.S. companies to 
compete more effectively with those in foreign countries. Especially at 
this point in time, the FTZ program can be a very effective means to 
boost American manufacturing and employment as we dedicate our energies 
to recovering from the economic impact of the pandemic. Foreign-trade 
zones (FTZs) exist in every U.S. State and Puerto Rico, directly 
support over 440,000 American jobs, generate over half a trillion 
dollars in U.S.-based, high-value-added manufacturing activity, and 
account for nearly seven percent of all U.S. exports.

    The FTZ program has been particularly vital to the Texas economy. 
There are 33 foreign-trade zones in Texas, the most of any State in the 
country, employing over 55,000 Texas with over half of the production 
activity in the petroleum sector and nearly one-quarter in the 
electronics sector.

    Because of the importance of the FTZ program to Texas and the 
Nation, I strongly support efforts to make the program stronger and 
more effective in achieving its objectives--to encourage the location 
of manufacturing in the United States, support and grow American 
manufacturing jobs, attract needed investment into American 
communities, and promote U.S. exports.

    Therefore, I was gratified to note that the USMCA Implementation 
Act made a needed and long-overdue change to the NAFTA Implementation 
Act that will allow manufacturers in U.S. FTZs to compete more 
effectively with imported products manufactured in Canada and Mexico. 
Specifically, the USMCA Implementation Act eliminated the unfair and 
discriminatory language in the NAFTA statute that prevents products 
manufactured in a U.S. FTZ that meet the rules of origin from competing 
on an equal tariff and cost footing in the U.S. market with imports 
from Canada and Mexico.

    This change is consistent with the administration's policy to 
support U.S. manufacturing and to encourage U.S. manufacturers to take 
advantage of the USMCA rules of origin, including the use of more 
domestic content. Are reports accurate that the administration is 
seeking to reinstate this provision into the USMCA implementing 
agreement as a ``technical correction''?

    Answer. One of the key objectives of the USMCA was to incentivize 
more manufacturing in the United States and North America through 
stronger rules of origin that further limit the use of non-originating 
inputs for goods traded under the agreement. Consistent with that 
objective, it is not the intention of the administration to change the 
treatment applied to FTZs under the NAFTA.

                                 ______
                                 
                Questions Submitted by Hon. Richard Burr
    Question. I applaud your decision to negotiate a comprehensive 
trade agreement with the United Kingdom. In addition to being a strong 
ally, the United Kingdom is one of the top export markets for U.S. 
goods and services, and U.S. businesses and workers stand to benefit 
tremendously from an agreement to further lower tariffs and streamline 
regulations. It is my hope that this agreement will also include robust 
intellectual property protections, including for biologics, in 
accordance with Trade Promotion Authority.

    Can I have your commitment that in accordance with U.S. law and TPA 
that you will seek high standards for biologics medicines in the UK 
trade agreement and future trade agreements?

    Answer. We intend to follow the principal negotiating objectives 
under the Bipartisan Congressional Trade Priorities and Accountability 
Act of 2015, which calls on USTR to seek standards similar to those 
found in U.S. law. I look forward to engaging with members of Congress 
on any particular issues of concern.

    Question. I appreciate USTR's willingness to engage with Mexico on 
recent actions relating to crop protection tools and biotechnology 
approvals. While USMCA does include language on dispute settlement for 
issues such as this, these mechanisms may be a lengthy and expensive 
process.

    Will you commit to working with your Cabinet-level peers at USDA 
and EPA to seek resolution to these outstanding agricultural trade 
issues with Mexico?

    Answer. USTR will continue work with USDA and EPA, including at the 
Cabinet level as necessary, to resolve these issues with Mexico.

                                 ______
                                 
               Questions Submitted Hon. Patrick J. Toomey
    Question. As the health-care system responds to the coronavirus 
pandemic, and as States decide how to safely reopen, it is more 
important than ever that medical providers and medical equipment 
manufacturers have the materials they need.

    As you know, the International Trade Commission (ITC) recently 
released a report, requested by the chairmen of the Senate Finance 
Committee and the House Ways and Means Committee, listing 114 goods 
vital to the COVID-19 response, including N95 face masks, hand 
sanitizer, protective garments, and COVID-19 diagnostic test 
instruments.

    As of the release of the report on May 5th, only 15 of the 56 
medical products in the report subject to the administration's section 
301 tariffs had been granted only a partial exclusion. 28 products 
received no exclusion.

    Which, if any, medical products on the ITC's list are still subject 
to 301 tariffs?

    When does USTR plan to issue exclusions for these remaining 
necessary products?

    Can you explain why these products were not granted exclusions more 
quickly?

    Answer. Based on consultations with HHS, USTR did not include 
numerous medical and health-related products in its actions under 
section 301 imposing tariffs on China in response to the abuses 
documented in USTR's section 301 report. In addition, early this year, 
again in consultation with HHS, USTR excluded numerous other products 
identified by HHS as relevant to the response to COVID-19. The majority 
of the tariff lines identified in the ITC report are not subject to 
China 301 tariffs, and USTR has granted exclusions on the majority of 
those products identified in the report that were subject to the 301 
tariffs. There is no basis to conclude that any products necessary for 
responding to COVID-19 are unavailable because of tariffs on those 
products.

    Question. I am encouraged to see the administration pursuing trade 
negotiations with the United Kingdom and Kenya. Free trade agreements 
that substantively lower tariffs and barriers to trade are critical in 
both increasing market access for American businesses and 
manufacturers, and improving the overall standard of living for 
Americans.

    Has the administration examined entering trade agreements with 
additional growth markets of the world for U.S. exporters, many of whom 
have high tariff walls, such as Brazil, India, and Nigeria?

    Recently, the United States has pursued a number of bilateral 
agreements, but outside of USMCA has not contemplated entering any 
multilateral agreements. While more difficult to negotiate, 
multilateral FTAs provide more opportunity for economic growth. What 
opportunities does USTR see for additional multilateral agreements with 
emerging market economies?

    Answer. As you note, we are currently engaged in negotiations for 
comprehensive free trade agreements with the United Kingdom and Kenya. 
In addition, I expect to start the negotiations for a free trade 
agreement with Japan in the next few months. However, negotiating 
comprehensive free trade agreements is a complex and time consuming 
process. Our workers, farmers, ranchers, and manufacturers face trade 
problems and USTR's mission is to seek to resolve those problems as 
effectively and efficiently as possible. That is why the administration 
is also engaging regularly with large economies like Brazil and India 
on specific issues that affect U.S. businesses to find solutions that 
will increase U.S. exports of goods and services and help to rebalance 
the U.S. trade deficit. With India, we are pursuing market access 
concessions that include tariff reductions in our GSP-related 
discussions, and with Brazil we are working to address regulatory 
concerns and other barriers to trade. These bilateral discussions 
allows us to better address the particular needs of our workers, 
farmers, ranchers, and businesses.

    Question. Almost all domestic manufacturers import some of their 
components, and many of these imported component products are subject 
to high 301 or 232 tariffs. Reducing or eliminating tariffs on these 
component products would allow many American manufacturers to produce 
more goods, at more affordable prices.

    Has USTR collected data or performed analyses measuring the impact 
of existing 301 and 232 tariffs on diverse manufacturing sectors? If 
not, will USTR do so, in order to fully understand which American 
manufacturers are being hurt by tariffs (and which are benefiting from 
tariffs)?

    Answer. Section 301 and section 232 are longstanding features of 
U.S. trade law meant to deal with major trade policy challenges. USTR 
administers the section 301 tariffs, which are aimed to obtain the 
elimination of significant trade issues such as cyber-enabled theft of 
intellectual property and coerced technology transfer identified in the 
investigation. Our colleagues in the Commerce Department, which 
oversees section 232, are addressing national security challenges.

    Determining an appropriate action under section 301 involves a 
balance between the most effective action to obtain the elimination of 
the unfair act, policy, or practice, and minimizing any adverse effects 
on the U.S. economy. To assist in achieving the appropriate balance, 
USTR conducts a notice and comment process on possible trade actions, 
and carefully considers all public input. In addition, any U.S.-based 
manufacturer believing itself hurt by section 301 or 232 tariffs on 
inputs for which there is no readily available U.S. or alternative 
source can request exclusions from the tariffs. We have granted 
thousands of exclusions to U.S.-based manufacturers through this 
process.

    Question. You suggested to the House Ways and Means Committee that 
you may not seek standards in upcoming trade agreements that provide 
intellectual property protection for biologic medicines. Congress was 
clear in putting into law the incentives needed for domestic 
development of biologics, in order to achieve a balance between the 
challenges in developing biologics and creating a viable pathway for 
biosimilars. Additionally, in TPA-2015 Congress instructed that USTR 
must seek to negotiate in support of the inclusion of trade agreement 
provisions that meet the standards of U.S. law in the area of IP 
protection for biologics.

    Global health developments, including the COVID-19 pandemic, 
subsequent to the signing of the USMCA have reinforced the importance 
of strong intellectual property rules, especially in the 
biopharmaceutical sector. What is USTR doing in ongoing trade 
negotiations to ensure that trading partners contribute appropriately 
to COVID-19 solutions, rather than free-riding on American investments 
in innovation?

    Can you commit to seeking high standards for biologics medicines in 
all future trade agreements, in accordance with U.S. law and TPA 
negotiating objectives?

    Regarding our existing trade agreements, what will you do to ensure 
our trading partners are enforcing existing commitments and deter 
countries from weakening such standards in their own IP regimes?

    How will you work to encourage those countries cited in the 2020 
Special 301 report to make positive changes to be removed from the 2021 
list?

    Answer: Fostering innovation and creativity is essential to U.S. 
economic growth, competitiveness, and the estimated 45 million American 
jobs that directly or indirectly rely on IP-intensive industries. To 
promote innovation, including the research and development of cutting-
edge treatments and cures required by the current crisis and in the 
future, USTR engages with trading partners to ensure that U.S. owners 
of IP have a full and fair opportunity to use and profit from their IP. 
In our FTA negotiations, we will follow the objectives set forth by 
Congress in the Bipartisan Congressional Trade Priorities and 
Accountability Act of 2015, including seeking a standard of protection 
similar to that found in U.S. law.

    Regarding biologics, in our FTA negotiations, USTR will follow the 
objectives set forth by Congress in the Bipartisan Congressional Trade 
Priorities and Accountability Act of 2015, including seeking a standard 
of protection similar to that found in U.S. law.

    A top trade priority for the administration is to use all possible 
sources of leverage to encourage other countries to open their markets 
to U.S. exports of goods and services and to provide adequate and 
effective protection and enforcement of IP rights. Toward this end, a 
key objective of the administration's trade policy is ensuring that 
U.S. owners of IP have a full and fair opportunity to use and profit 
from their IP around the globe. USTR will use all appropriate trade 
tools to ensure that our trading partners are meeting their existing 
intellectual property commitments. More generally, USTR is committed to 
holding foreign countries accountable and exposing the laws, practices, 
and other measures that fail to provide adequate and effective IP 
protection and enforcement for U.S. inventors, creators, brands, 
manufacturers, and service providers.

    USTR will engage with the countries cited in the 2020 Special 301 
Report and will use all appropriate trade tools to ensure that they 
address U.S. intellectual property protection and enforcement concerns. 
In particular, the administration continues to closely monitor 
developments in, and to engage with, those countries that have been on 
the Priority Watch List for multiple years. For countries failing to 
address U.S. concerns, USTR will take appropriate actions, which may 
include enforcement actions under section 301 of the Trade Act or 
pursuant to World Trade Organization (WTO) or other trade agreement 
dispute settlement procedures.

    Question. As we discussed at the hearing, I continue to be 
concerned that the stated goal of the administration's objectives with 
a section 232 tariff regime to support domestic steel and aluminum 
makers is in conflict with an equally important sector of the economy: 
American manufacturers that need access to a wide range of raw steel 
and aluminum products.

    This is not merely an academic concern in Pennsylvania. I have 
constituent manufacturers who have had to shut down and lay off 
manufacturing workers due to unsustainable tariffs on their inputs. To 
help mitigate this problem, the administration has granted permanent 
tariff exemptions in exchange for quantitative limitations on U.S. 
imports of steel from Brazil, South Korea, and Argentina.

    Can you provide me with an explanation as to how the determination 
was made to grant permanent tariff exemptions to Brazil, South Korea, 
and Argentina?

    What steps would need to be taken for USTR to grant a similar 
tariff exemption on steel imports from Indonesia?

    Answer. Exemptions from the section 232 steel and aluminum tariffs 
are granted by the President. Proclamations that the President has 
issued relating to these tariffs outline the factors the President has 
considered in granting such exemptions. These include the existence and 
nature of a security relationship with a country, as well as whether 
the United States and a country are able to arrive at satisfactory 
alternative means to address the threatened impairment of national 
security caused by imports from that country. On the basis of his 
assessment of these factors, and in light of the nature of measures 
agreed with those partners, the President has determined that steel 
imports from certain countries (including Argentina, Brazil, and South 
Korea) no longer threaten to impair the national security.

    Question. The administration has not hesitated to use unilateral 
trade actions, including tariffs and quotas, to address what they 
perceive to be national security threats and unfair trade practices, 
including with respect to U.S. allies. This approach has caused U.S. 
trading partner to retaliate against U.S. exports, such as agriculture 
and chemicals, and coordination with allies to address big problems in 
the trade arena is now much more difficult.

    Why is USTR focusing on unilateral action instead of coordinating 
with our allies to address concerning trade practices?

    What is USTR's strategy for replacing market access that U.S. 
exporters have lost in China, the European Union, and other markets as 
a result of unilateral tariffs?

    Answer. I am committed to using the most effective available tools 
to address unfair trade policies that harm U.S. workers, businesses, 
farmers, and ranchers. We have made extensive efforts to coordinate 
with like-minded trading partners to address trade concerns. For 
example, I launched a trilateral process with Japan and the EU to 
address non-market-oriented policies and practices of third countries 
that lead to severe overcapacity, create unfair competitive conditions 
for their workers and businesses, hinder the development and use of 
innovative technologies, and undermine the proper functioning of 
international trade and discussed various tools needed to deal with 
these problems. But while discussion can be helpful, it is no 
substitute for taking effective action that seeks to change China's 
practices that damage U.S. workers and businesses. I have also not 
hesitated to take action to directly address unfair and harmful trade 
policies, such as China's policies regarding technology transfer, 
intellectual property, and innovation. Our allies, unfortunately, are 
not always willing to coordinate and work with us, such as the EU's 
decision to side with China in a WTO dispute on the Section 301 action 
to address China's forced technology transfer.

    The President's trade agreements have resulted in major 
improvements in market access in key export markets. For example, under 
the Phase One agreement, China has committed to making unprecedented 
levels of purchases of U.S. agricultural and industrial products. And 
under the USMCA and the U.S.-Japan Trade Agreement, our trading 
partners have agreed to remove major impediments to U.S. exports.

    Question. One of the key barriers facing American companies seeking 
to market access and exports are regulations, especially as other 
countries promote their models of regulation. Other countries, seeking 
to avoid having to compete with American exports, are increasing the 
number of domestic sanitary/phytosanitary, labor, and environmental 
regulations.

    How is USTR working with regulators to promote U.S. values of sound 
science and risk assessment with potential trade partners?

    Can you commit to not pursuing provisions in upcoming FTAs that 
increase the regulatory burden upon American exporters?

    Answer. USTR works closely with our colleagues in U.S. regulatory 
agencies when we engage with foreign governments on issues regarding 
the adoption, implementation, and enforcement of measures covering food 
safety, plant health, animal health, and environmental regulations, to 
convey the importance of basing measures on science and risk 
assessment.

    FTA discussions with respect to sanitary and phytosanitary measures 
focus on the critical importance of countries meeting their WTO 
commitments to base SPS standards on science and risk assessment and to 
ensure that measures are not more trade restrictive than necessary to 
meet legitimate objectives, including the protection of human, plant, 
and animal life and health.

    Question. On June 2nd, USTR initiated an additional section 301 
investigation into digital services taxes that have been proposed or 
adopted by a number of our trading partners. While I agree with the 
need to determine whether digital services taxes disproportionately 
impact U.S. companies, I believe any potential remedial action in 
accordance with the findings of your investigation, including tariffs, 
should be balanced and targeted to avoid unduly impacting American 
consumers. I am concerned tariffs on a broad set of products not 
directly related to this investigation would further exacerbate the 
economic uncertainty most Americans face as they continue to navigate 
the COVID-19 crisis.

    Will you commit to ensuring any potential remedial action is 
targeted to limit the impact on American consumers and sellers?

    Answer. Determining an appropriate action under section 301 
involves a balance between the most effective action to obtain the 
elimination of the unfair act, policy, or practice, and minimizing any 
adverse effects on the U.S. economy, including small or medium-size 
businesses and consumers. To assist in achieving the appropriate 
balance, USTR conducts a notice and comment process on possible trade 
actions, and carefully considers all public input.

    Question. In October 2019, USTR imposed duties on certain European 
goods in accordance with a WTO ruling that European Union member states 
unfairly subsidized Airbus. To date, USTR targeted primarily the 
countries responsible for the Airbus subsidization--France, Germany, 
Spain, and the United Kingdom.

    Will you continue this approach to ensure only products from those 
countries responsible for subsidization are considered for potential 
retaliation, rather than unduly penalizing countries not party to the 
dispute?

    Furthermore, in keeping with USTR's latest decision in February, 
will non-aircraft-related items from countries not party to the dispute 
be considered for tariffs in the next round?

    Answer. The European Union as a whole, and France, Germany, Spain, 
and the United Kingdom, are each party to the underlying dispute and 
are collectively responsible for the unfair subsidization of Airbus. 
Because of this, USTR's action in October 2019, and the action taken in 
February 2020, appropriately focused on the EU member States that 
subsidize Airbus, and also covered products of other member States of 
the European Union. Regarding further review of the action, USTR has 
established a process where interested persons can submit comments on 
the action, and comments are currently being accepted through July 
26th. Among other matters, USTR specifically invited comments regarding 
potential disproportionate economic harm to U.S. interests, including 
small or medium size businesses and consumers. USTR will continue to 
consider public comments concerning potential effects on the U.S. 
economy, and any other comments, when considering any possible further 
modifications to this trade action.

                                 ______
                                 
                Questions Submitted by Hon. Rob Portman
    Question. I was pleased to see China change its regulations 
concerning intellectual property protection. However, many of the ways 
that China undermines intellectual property protections are through 
informal coercion or outright theft.

    How does USTR intend to ensure that China complies with its new 
regulations?

    Answer. The Phase One agreement requires China both to end its 
practice of applying informal pressure and coercion to accomplish 
technology transfer and to revise its legal and regulatory regimes in a 
number of ways, including in the areas of trade secrets, patents, 
pharmaceutical-related IP, trademarks, and geographical indications.

    In addition, the agreement requires China to make numerous changes 
to its judicial procedures, to establish deterrent-level penalties, and 
to ensure the effective enforcement of judgments. China also is to take 
various specific steps to improve civil, administrative, and criminal 
enforcement against pirated and counterfeit goods.

    The United States will vigilantly monitor China's progress in 
eliminating its unfair trade practices and implementing these 
obligations. We will use all appropriate trade tools, including the 
enforcement mechanism under the Phase One agreement as necessary, to 
ensure that China does not unfairly benefit from the United States' 
innovations through intellectual property theft or coercion.

    Question. I understand language ensconcing section 230-like 
protections is being considered as part of the current U.S.-UK trade 
negotiations. Until recently that was unprecedented. I find that 
concerning.

    Why do you believe that section 230-like protections have not been 
included in previous trade agreements, across the different 
administrations (of both political parties), given the fact that 
section 230 has been part of U.S. law since 1996?

    Answer. Over the past decade, U.S. Internet platforms have become 
global leaders in digital trade and are increasingly dependent on 
foreign markets for their growth and the U.S. jobs they support. 
Accordingly, we have increased our focus on addressing existing and 
nascent digital barriers in foreign markets and developing provisions 
to address them in trade agreements. A provision addressing the non-IP 
civil liability of interactive computer service suppliers can play an 
important role as part of a broader set of comprehensive, high standard 
digital trade rules designed to facilitate the continued growth of the 
U.S. economy and the global digital economy. At the same time, we 
recognize that such provisions must provide significant flexibility for 
the Congress, the administration, and our negotiating partners to 
evolve policy and law in response to new challenges.

    Question. I also understand section 230-like protections are also 
being considered as part of the WTO's e-commerce talks.

    Do you believe that including these protections within a WTO 
agreement would limit the policy space available to the United States 
Congress when governing as it relates to the Internet, especially given 
the Appellate Body's interpretations of Article XX of the GATT?

    Answer. A provision addressing the non-IP civil liability of 
interactive computer service suppliers can play an important role as 
one element of a broader set of comprehensive, high standard digital 
trade rules to facilitate the continued growth of the U.S. economy and 
to support innovative Internet-based business models. At the same time, 
we recognize that such provisions must provide flexibility for the 
Congress, the administration, and our negotiating partners to evolve 
policy and law in response to new challenges.

    Question. Recently, a NAFTA binational panel upheld the 
International Trade Commission's affirmative injury finding in the 
latest round of the U.S.-Canada softwood lumber dispute. With the 
failure of Canada's litigation strategy, it may be a ripe time to 
resolve these persistent issues at a high, political level similar to 
the resolution of the last round of the softwood lumber dispute 15 
years ago.

    Can you provide an update on the efforts USTR has taken to resolve 
this issue?

    Answer. This administration is committed to the robust enforcement 
of U.S. trade remedy laws. Ensuring that U.S. softwood lumber producers 
are able to compete on a level playing field against the injurious 
effects of unfairly subsidized and dumped Canadian imports is an 
important priority for the Trump administration. It is my view that 
U.S. trade remedy laws are working as intended and the U.S. actions are 
consistent with U.S. international obligations. The administration is 
open to resolving our differences with Canada over softwood lumber. 
That would require addressing Canadian policies that create an uneven 
playing field for U.S. lumber producers.

    Question. I was very pleased to see the United States-Canada-Mexico 
Agreement (USMCA) enter into force. I understand that Mexico may still 
not be in compliance with some provisions of the agreement, especially 
as it relates to U.S. media firms.

    Has USTR engaged with Mexico regarding Mexico's discrimination 
against American media firms (including the so-called 6-minute rule), 
and will USTR urge Mexico to cease such discrimination now that the 
agreement has been brought into force?

    Answer. USTR has been engaged with Mexico on media issues and will 
continue to press Mexico to comply with its USMCA obligations. At the 
moment, Mexico has neither implemented the so-called 6-minute rule nor 
created new local content requirements, but we are continuing to 
monitor and to engage bilaterally on these issues.

    Question. The water treatment industry supports 4,000 jobs in Ohio, 
and the industry's products are vital for providing clean water to 
citizens. Pursuant to the section 301 exclusion process, USTR granted 
an exclusion for water filtration equipment (HTS code 8421.21.0000), 
which includes ``pitchers, bottles, and units designed for 
incorporation into refrigerators, appliances or sink faucets'' and 
``[f]iltering or purifying machinery or apparatus of any kind used for 
wastewater treatment.'' On May 20th, USTR extended the exclusion for 
the latter, but not the former.

    Can you explain the rationale for this decision?

    Answer. USTR examines whether to extend particular exclusions on a 
case-by-case basis. Additionally, a 10-digit HTS code may cover a 
number of exclusions for a number of different products. The products 
may be produced by the same manufacturer or different manufacturers and 
may be in the same industry or different industries. As the two 
exclusions referenced indicates, the 10-digit code for water filters 
(8421.21.0000) covers a range of products and a range of product 
specific exclusions. Thus, while two products referenced may be covered 
by the same 10-digit code, application of the factors examined by USTR 
on whether to extend an exclusion may result in different results, as 
it did here.

    Question. China is pursuing new forms of protectionism and coercive 
market distortions, such as their Corporate Social Credit System. This 
raises a number of concerns for American workers and industries. If the 
Corporate Social Credit System violates most favored nation (MFN), 
national treatment, or some other WTO commitment, we should go after 
them with all we've got. However, I must recognize that China may be 
able to structure the Corporate Social Credit System in such a way that 
does not violate their WTO commitments.

    Therefore, do you believe Congress should be looking at our 
strategic competitiveness and considering new tools to address unique 
and unprecedented threats to free markets like the Corporate Social 
Credit System?

    Answer. I share your concerns regarding the continued development 
and deployment of China's Corporate Social Credit System and its 
potential implications for American companies, innovators, workers, and 
investors. I welcome Congress's continued attention to China's 
Corporate Social Credit System and other issues related to U.S. 
strategic competitiveness.

    As you know, President Trump has taken strong action to preserve 
American competitiveness and rebalance our trade relationship with 
China. Our negotiations with China are a direct result of USTR's 
investigation into China's unfair practices with respect to American 
intellectual property rights, innovation, and technology. We will 
continue to press China to implement the structural changes necessary 
to fully resolve our concerns and will continue to consult with and 
report to you regarding our efforts.

    Question. The WTO authorizes the use of tariffs to bring about 
compliance with the rulings of the DSB. Recently, this issue has taken 
on prominence with wine industry's concerns about inclusion of wine 
tariffs as part of retaliation in the Large Civil Aircraft case.

    Can you elaborate on how WTO-sanctioned tariffs help bring about 
foreign compliance with DSB rules? What data does USTR use to determine 
the marginal effectiveness of retaliatory tariffs on specific goods in 
these instances?

    Answer. Determining an appropriate action under section 301 
involves a balance between the most effective action to obtain the 
elimination of the unfair act, policy, or practice, and minimizing any 
adverse effects on the U.S. economy, including small or medium size 
businesses and consumers. To assist in achieving the appropriate 
balance, USTR conducts a notice and comment process on possible trade 
actions, and carefully considers all public input.

                                 ______
                                 
                 Questions Submitted by Hon. Tim Scott
    Question. Since USMCA has now entered into force, the automotive 
rules of origin are in effect. In light of the accelerated time frame 
through which the entry into force has occurred, unintended 
repercussions and issues are likely to emerge.

    Do you intend to fulfill your commitment offered during the hearing 
to create a formal mechanism for the automotive industry (both vehicle 
manufacturers and parts suppliers) to consult with USTR as the 
implementation of the USMCA proceeds?

    U.S. Customs and Border Protection (CBP) has an established Customs 
Commercial Operations Advisory Committee (COAC) for the USMCA with 
representatives from the automotive sector. Will USTR create a forum or 
advisory body through which it can discuss implementation concerns, 
additional fixes that may be necessary or other relevant concerns?

    Additionally, do you commit to keeping my office and staff informed 
of these consultations and committee formation?

    Answer. USTR already maintains formal and informal mechanisms to 
communicate with and receive concerns from private sector stakeholders 
in the automotive and truck industries. USTR regularly briefs the 
Interagency Trade Advisory Committee 2 (ITAC 2), which represents the 
views of the automotive industry, capital goods sector, and organized 
labor and is composed of representatives of those sectors. We will 
continue to work through ITAC 2, related advisory committees, and 
directly with automotive stakeholders to discuss issues related to 
USMCA implementation. We will continue to keep your office and staff 
informed of the results of our consultations with industry 
representatives.

    Question. We have over 145,000 workers in South Carolina directly 
employed as a result of international investment and a whopping 52 
percent of all FDI jobs are in the manufacturing sector. South Carolina 
has seen the benefits of having over 770 international employers call 
our State home.

    How will the administration handle the reconciliation process that 
existed under NAFTA. Will NAFTA compliance be extended and/or amended 
under USMCA? If a company does have to go back and correct an entry, 
the company will have to pay any duties owed but how will interest and 
fines be handled?

    Answer. An importer of goods that entered prior to July 1, 2020 may 
make a post-importation NAFTA claim within 1 year of importation.

                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
    Question. Aluminum is responsible for over 45,000 jobs in the 
Hoosier State, and over half a million jobs are tied to manufacturing 
in Indiana alone. I was proud to support USMCA, which included 
provisions excluding aluminum manufacturers from section 232 tariffs. 
This has been tremendously helpful to my constituents dependent on a 
complex regional supply chain that includes Canadian inputs. The USMCA 
entry into force date occurred on July 1st, and I know aluminum 
manufacturers in my State of Indiana are looking forward to conducting 
business in a neutralized playing field, but I have heard concerns 
about potential action that would disrupt the supply chain balance.

    How is USTR engaging with the U.S. aluminum industry stakeholders, 
particularly those involved in manufacturing aluminum products like 
sheet, foil, and extrusions, to understand the dynamics of this 
important exemption?

    How does USTR monitor aluminum imports from Canada, and how does 
USTR factor in the current COVID-19 pandemic effect on increases and 
decreases in different types of aluminum imports?

    USMCA creates new preferences for aluminum produced in the United 
States or Canada, with new requirements and incentives for automakers 
and parts manufacturers to source aluminum and steel within North 
America. How would automakers comply with any new requirements if USTR 
should impose aluminum tariffs on North American aluminum purchases?

    Answer. The President exempted Canada from the tariffs he imposed 
under section 232 on the basis of a clear understanding that imports of 
steel and aluminum from Canada would remain at historical levels. The 
administration is closely monitoring imports from Canada, utilizing 
information from the U.S. Census Bureau, U.S. Customs and Border 
Protection, and the Department of Commerce's Steel Import Monitoring 
and Analysis system. We are assessing these data in the context of 
broader developments in the U.S. market, including demand contractions 
resulting from the COVID-19 pandemic.

    The President imposed tariffs on aluminum and steel imports under 
section 232 because he determined that aluminum and steel articles are 
being imported into the United States in such quantities and under such 
circumstances as to threaten to impair the national security of the 
United States. The provisions in USMCA that seek to incentivize use of 
North American steel and aluminum are consistent with and supportive of 
the objective of the section 232 tariffs. I do not believe that any 
steps the President may take to ensure the continued integrity of the 
national security measures he has imposed under section 232 would 
hinder the ability of automobile manufacturers to comply with USMCA 
requirements.

    Question. American businesses are rapidly moving supply chains 
given the complications of coronavirus. The past few years have 
demonstrated the need to re-shore manufacturing and it has only become 
more evident that a diverse supply chain will help address challenges 
exacerbated by the global pandemic. Obviously, the most admirable goal 
is to bring production back to American soil; if that is impossible, 
Congress and the administration should consider policies that at least 
divert supply chains out of China where feasible. Furthermore, any 
action from this administration--or any action that Congress takes--
should absolutely minimize harm to American businesses and 
manufacturers. This is especially critical when businesses are already 
dealing with the negative economic impact from coronavirus.

    How can Congress and USTR coordinate on our mutual goal of at least 
diversifying supply chains or bringing production back to American 
soil?

    What strategies should we consider to spur re-shoring efforts? For 
companies already moving their supply chain, should extensions for 301 
exclusions be on the table as a measure to provide relief from the 
economic impacts of the coronavirus pandemic?

    Answer. One lesson to be drawn from the COVID-19 pandemic is that 
dependence on other countries, especially ones like China, to source 
goods and key strategic products creates a vulnerability for the United 
States. This administration's economic and trade policies are helping 
to overcome that vulnerability by encouraging diversification of supply 
chains and more manufacturing in United States. I welcome Congress's 
continued support in our efforts.

    One of the factors examined by USTR in determining whether to 
extend an exclusion is the efforts, if any, the importers or U.S. 
purchasers have undertaken since imposition of the additional duties to 
source the product from the United States. This administration will 
continue to support more manufacturing in the United States and explore 
strategies to spur our re-shoring efforts.

    Question. At a time when the United States is trying to improve and 
gain market access safely, we need to consider that other countries are 
doing the same, particularly China. Over the past few decades, China's 
foreign direct investment in South American and Caribbean nations has 
greatly increased which poses questions about their intentions and 
objectives. It would appear that China is attempting to reduce reliance 
on U.S. products and resources as well as find other export 
opportunities. As Chinese foreign direct investment has increased in 
the Caribbean through loans for infrastructure projects, trade volumes 
have risen, albeit in a one-sided fashion. This is concerning as China 
uses their geopolitical position to influence policies of Caribbean 
nations that could impact the U.S.'s national security.

    As we look ahead to the expiration of the Caribbean Basin 
Initiative at the end of September, should Congress be concerned about 
current and growing foreign direct investment from China into Caribbean 
countries? How can USTR combat Chinese influence in the region?

    As coronavirus response continues to negatively impact economies of 
our neighboring countries, should the U.S. be concerned about an 
increasing China foothold in trade policies?

    Answer. The administration is following closely China's engagement 
in the Western Hemisphere, including in the Caribbean region. Along 
with many other agencies, USTR is monitoring China's investment 
activities and working to promote U.S. economic interests and influence 
in the region. The U.S.-CARICOM Trade and Investment Council have 
strengthened our partnership with the region and facilitated a dialogue 
that has resolved trade irritants and increased trade facilitation. 
During this pandemic, we have worked effectively with our Caribbean 
trade partners to strengthen hemispheric supply chains and indeed 
remain CARICOM's top trading partner.

    Question. Provisions discouraging intellectual property theft 
should be included in ongoing trade negotiations, and the United States 
should remain vigilant in enforcing anti-IP theft provisions in 
existing trade agreements. Biopharmaceutical innovators rely on proper 
enforcement of these requirements both now and in the future in order 
to protect investments benefiting both American consumers and 
businesses.

    How will USTR ensure that other nations do not unfairly benefit 
from the United States' innovations through IP theft?

    Answer. A top trade priority for the administration is to use all 
possible sources of leverage to encourage other countries to open their 
markets to U.S. exports of goods and services and to provide adequate 
and effective protection and enforcement of intellectual property (IP) 
rights. Toward this end, a key objective of the administration's trade 
policy is ensuring that U.S. owners of IP have a full and fair 
opportunity to use and profit from their IP around the globe. USTR will 
use all appropriate trade tools to ensure that our trading partners are 
meeting their existing intellectual property commitments. More 
generally, USTR is committed to holding foreign countries accountable 
and exposing the laws, practices, and other measures that fail to 
provide adequate and effective IP protection and enforcement for U.S. 
inventors, creators, brands, manufacturers, and service providers.

                                 ______
                                 
              Questions Submitted by Hon. Robert Menendez
    Question. Africa is a logical destination for many companies 
looking to diversify away from China. It is critical that Kenya can 
still draw upon the benefits from other African Growth and Opportunity 
Act (AGOA) countries. Moreover, AGOA countries must still be able to 
partner with Kenya. In the end, regionalization will encourage more 
countries in the region to pursue trade agreements with the U.S.

    Will the U.S.-Kenya trade agreement will include flexibilities that 
promote regionalization?

    Do you support early renewal for AGOA, to provide certainty to 
industry, and provide other African countries a path to follow in 
Kenya's footsteps towards a trade agreement with the United States?

    Answer. The administration enthusiastically supports Africa's 
regional integration efforts. We have identified as one of our 
negotiating objectives with the Kenyans to support regional economic 
integration where appropriate.

    Regarding a proposal for an early renewal of AGOA, by the time the 
program expires in 2025 it will have run for 25 years, including a 10-
year extension, without having the transformative effect that an FTA 
can generate. That's why the administration launched an African model 
FTA initiative. The Kenyan Government has stepped up and some other 
governments in the region have expressed an interest in being 
considered next. An early renewal of AGOA would undermine this 
initiative and offer more of the same.

    Question. The hospitality industry has been particularly devastated 
by the COVID-19 pandemic. Necessary social distancing and stay-at-home 
orders have forced restaurants, cafes, bars and other locations that 
serve wine and spirits to close or drastically reduce their operations. 
Hundreds of thousands of establishments have gone out of business 
leaving millions of Americans out of work. As the businesses that have 
been able to survive face the daunting task of reopening, the last 
thing we should be doing is making it more expensive for them to get 
back on their feet.

    Are you considering the impact that tariffs on alcohol imports are 
having on small independent businesses that have already been stressed 
by the pandemic?

    Answer. When taking a tariff action, USTR considers the extent to 
which the tariff action may disproportionately impact U.S. interests, 
including those of small and medium-size businesses.

    Question. On June 14th, Bloomberg reported that two employees of 
the Office of the United States Trade Representative (USTR) who had 
been intimately involved in negotiating the U.S.-Mexico-Canada 
Agreement's (USMCA) rules of origin, while still on USTR payroll, had 
approached private companies offering to serve as paid advisers after 
they leave government service. When asked about this in the hearing, 
you suggested that the two employees had sought approval from USTR's 
ethics office to engage in such conduct and that ``career employees--as 
opposed to political employees--can do things like this.''

    On what date did these two employees first seek approval from 
USTR's ethics office to solicit future consulting work from clients 
that may have had business before USTR? On what date did USTR's ethics 
office provide such clearance? Please provide copies of any written 
ethics advice USTR's ethics office provided to these employees?

    Answer. USTR's Designated Agency Ethics Official (DAEO) met with 
the two individuals on February 25, 2020, at which time they said that 
they were considering leaving USTR to establish a business to provide 
advice to auto companies on compliance with the USMCA. The DAEO told 
the employees that the seeking employment provisions of the criminal 
conflict of interest statute (18 U.S.C. Sec. 208) prohibit an employee 
from taking official action that can have a financial effect on a post-
government employer. The DAEO advised them that if they took action to 
establish a company like the one they described, then they could not do 
work for USTR that would affect the company or clients they might 
solicit. The DAEO told them that the primary applicable post-government 
restriction (18 U.S.C. Sec. 207(a)(l)) permanently prohibits 
communications with or appearances before any court or Federal agency 
with the intent to influence on behalf of someone other than the United 
States on a particular matter involving specific parties in which they 
participated personally and substantially while with the government. 
The DAEO also advised that under the U.S. Office of Government Ethics 
(OGE) implementing rules (5 CFR Sec. 2641.201(h)), international 
agreements, such as treaties and trade agreements that address a large 
number of diverse issues or economic interests, are matters of general 
applicability that are not particular matters involving specific 
parties. The DAEO provided a copy of the September 23, 2016 OGE legal 
advisory explaining the post-government service restrictions.\3\
---------------------------------------------------------------------------
    \3\ https://www.oge.gov/Web/OGE.nsf/Legal%20Advisories/
3741DC247191C8B88525803B0052
BD7E/$FILE/LA-16-08.pdf?open.

    The DAEO conferred with the two individuals in March 2020 to 
discuss the steps they planned to take in furtherance of their 
recusals. In addition, the DAEO conferred with the USTR General 
Counsel, and the individuals confirmed to the General Counsel in March 
and June that they had taken all appropriate steps to recuse 
effectively from specific party issues. Although USTR understood that 
they intended to leave the agency at the end of March, the individuals 
postponed their departure date on multiple occasions due to disruptions 
caused by the COVID-19 pandemic and stated that they were reconsidering 
their decision to resign from USTR in light of the uncertain business 
---------------------------------------------------------------------------
environment resulting from the pandemic.

    I have been informed that the individuals, who occupied positions 
at the GS-15 level, are not subject to the so-called 1-year cooling off 
period (18 U.S.C. Sec. 207(c)), which prohibits a former ``senior 
employee'' from appearing before the department or agency they served 
for 1 year after their exit date. When I stated in my testimony that 
career employees ``can do things like this,'' I was referring to the 
situation where a career employee at or below the GS-15 level still can 
lobby USTR with certain limits immediately after leaving. I think that 
is bad policy for all career employees and should be changed.

    Question. On what date and from which specific subject matters or 
activities did these employees recuse themselves? Please provide any 
written documentation of these recusals if any exist. If they had 
recused themselves from any work, what functions were they assigned to 
following those recusals?

    Answer. The DAEO discussed recusal obligations with the individuals 
in February and March 2020, and provided a copy of the OGE legal 
advisory. The two individuals informed USTR personnel in mid-March 2020 
of their determination to recuse themselves from working or 
communicating directly with auto manufacturers and other companies in 
the auto industry, and on issues pertaining to a specific company, in 
order to protect their future ability to represent those companies' 
interests back to the government. Subsequent to that date, the 
individuals worked on other USMCA implementation issues.

    Question. On what date did you become aware that these employees 
had recused themselves from future work on USMCA automotive rules of 
origin or other issues, as applicable? On what date did you become 
aware of the ethics advice provided by USTR's ethics office to these 
employees?

    Answer. In mid-March 2020, my staff informed me that the 
individuals had recused themselves from certain implementation issues 
related to the USMCA auto chapter. I also was informed that the 
individuals had sought ethics advice and reviewed the OGE legal 
advisory.

    Question. At any point during their employment, did these employees 
use any government time or resources to solicit future business?

    Answer. My staff and I are not aware of use of government time or 
resources by the individuals to solicit future business.

    Question. Are these employees still employed at USTR? If so, are 
they still permitted to make similar outreach to companies about post-
USTR work?

    Answer. The individuals resigned from USTR effective June 13, 2020.

    Question. How many current USTR employees are operating under 
circumstances that could allow them to solicit future private business 
while still at the agency? Of those employees, how many have used 
government resources to solicit business for personal ventures?

    Answer. USTR has a robust ethics program that includes 
comprehensive new entrant and annual training for all employees. I have 
full confidence in the USTR ethics team. My staff is unaware of any 
current USTR employees who may be violating ethical standards.

    Question. Please provide a detailed legal explanation of the 
statute or USTR guidance that permits career officials to 
simultaneously pursue personal business interests involving clients 
that may have business before USTR.

    Answer. I have been advised that, like all Executive branch 
employees, USTR employees are subject to the criminal post-employment 
restrictions in 18 U.S.C. Sec. 207, and that application of these 
restrictions varies depending on the responsibilities of the position 
held by the former employee. As noted above, I was informed that while 
the law prohibits senior officials from appearing before USTR for 1 
year after leaving the agency, it does not impose the same blanket 
prohibition on less senior employees like the individuals referenced in 
your questions. In my view, as I stated during my testimony, I think 
that should be changed and that no former employee should be allowed to 
lobby their former agency for at least a year after leaving that 
agency.

    Question. Have political appointees sought and/or received approval 
for engaging in similar consulting work? If so, please provide copies 
of any written ethics advice USTR's ethics office provided to these 
employees.

    Answer. My staff and I are unaware of any political appointees or 
other USTR employees seeking or receiving approval for engaging in 
consulting work.

    Question. 18 U.S.C. 207(b) bars executive branch employees who 
participated personally and substantially in any ongoing trade or 
treaty negotiation from aiding or advising any other person on an 
ongoing trade negotiation for 1 year after employment with the United 
States terminates.

    Does this restriction apply to these two employees referenced 
previously? If not, please provide a legal justification, including an 
explanation as to whether they have participated in an ongoing trade 
negotiation within the past year and whether any trade negotiation they 
participated in within the past year is no longer ``ongoing.''

    Answer. I have been advised that section 207(b) applies to all 
former USTR employees and because the USMCA negotiations ended several 
months before these individuals announced their desire to leave USTR, 
it is not an ongoing negotiation. I would support a change to the law 
to broaden the prohibition.

    Question. Please clarify whether the two employees referenced 
previously will have a 1 year cooling off period under 18 U.S.C. 207(b) 
even after USMCA negotiations cease to be ``ongoing'' or if the 1 year 
cooling off period imposed by 18 U.S.C. 207(b) automatically extinguish 
once the USMCA goes into effect.

    Answer. I have been informed that section 207(b) does not apply to 
the USMCA because it is not on ongoing negotiation and the individuals 
are not subject to the 1 year cooling off period in section 207(c). 
Again, I think there should be a 1 year cooling off period in such 
circumstances and would support efforts to make that happen.

    Question. Does the restriction under 18 U.S.C. 207(b) apply to all 
current USTR employees with respect to USMCA and negotiations between 
the United States and the European Union, United Kingdom, China, Japan, 
and Kenya? If not, please provide a detailed explanation, including the 
circumstances by which a trade negotiation ceases to be ``ongoing'' 
under 18 U.S.C. 207(b).

    Answer. Section 207(b) applies to all former USTR employees. I 
consider negotiations to be ongoing until an agreement is reached or 
the parties formally announce they are ending the negotiations.

    Question. Please explain whether the USMCA negotiations and 
negotiations between the United States and the European Union, United 
Kingdom, China, Japan, and Kenya are considered particular matters 
involving specific parties for purposes of 18 U.S.C. 207(a).

    Answer. I have been advised that the negotiations described in this 
question are not particular matters involving specific parties for 
purposes of 18 U.S.C. Sec. 207(a), and that under the OGE implementing 
rules, international agreements, such as treaties and trade agreements 
that address a large number of diverse issues or economic interests, 
are matters of general applicability that are not particular matters 
involving specific parties. See 5 CFR Sec. 2641.201(h).

    Question. India has a host of trade policies that discriminate 
against U.S. companies, especially for medical devices, which are a key 
industry in my home State of New Jersey. At the same time, New Jersey 
has dozens of small and medium-sized companies that import from India 
and have suffered after India lost its GSP beneficiary status. Some of 
them were hit hard by the China tariffs moved their sourcing to India, 
only to find out shortly thereafter that the administration decided to 
remove India's trade preferences.

    Can you commit to making it a priority to solve our issues with 
India so they can be quickly reinstated into GSP?

    What is the current status of talks with India to resolve the 
issues raised in the country's GSP petitions?

    What is your plan to get a successful resolution to these issues?

    Do you have plans for any direct engagement with your Indian 
counterparts in the coming months?

    Answer. We are working to ensure that India addresses market access 
concerns, which could allow for the reinstatement of the country's GSP 
benefits. I have discussed these concerns, including medical device 
price controls, on recent calls with Minister Goyal and my team is 
continuing to engage to make progress on a broad range of trade 
barriers. In order to satisfy the GSP eligibility criteria, the Indian 
Government must remove barriers that have historically impeded market 
access for U.S. goods and services so that it is providing reasonable 
and equitable access to its market.

    Question. Child labor remains far too common in Kenya. According to 
the Department of Labor, over 35 percent of Kenyan children ages 5 to 
14 engage in some form of work. For the lucky ones, that might include 
helping on the family farm or minding a store. But for too many Kenyan 
children, it could also mean sorting through waste for scrap metal, 
harvesting tobacco, or being exploited in sex trafficking. A trade 
agreement with Kenya that doesn't include the proper protections could 
exacerbate this problem.

    How do you think we can best address this issue in our negotiations 
and will you commit to working with me so the final agreement with 
Kenya includes the right set of obligations to address the specific 
challenges of reducing child labor in the country?

    Answer. I agree this is a serious issue that we must address. The 
negotiating objectives Congress set out in TPA emphasize the importance 
of addressing exploitative child labor and the worst forms of child 
labor, and we will work with Kenya toward ensuring such practices have 
no place in its economy. I am committed to ensuring that our trade 
partners understand the extent of their labor obligations and have the 
tools to respect labor rights in practice, including prohibitions on 
child labor. We will seek to ensure that Kenya, like other FTA 
partners, adopts and maintains laws for the effective abolition of 
child labor and prohibition of the worst forms of child labor, and has 
the means to enforce those laws. I will work with you and other members 
of Congress on the United States' approach to and positions on 
addressing this challenge during the negotiations.

                                 ______
                                 
              Questions Submitted by Hon. Thomas R. Carper
    Question. I understand that USTR has set up the Interagency 
Environment Committee and has hired a number of new staff dedicated to 
environmental enforcement. I also understand that USTR and EPA have 
agreed that the new Interagency Environment Committee will review all 
allegations of USMCA environmental violations that are submitted to the 
Commission for Environmental Cooperation, not only the submissions that 
result in a factual record. I was pleased to learn of this progress, 
and I commend you and your team for moving quickly on implementation in 
this area.

    According to the Commission for Environmental Cooperation's online 
``Submissions on Enforcement Matters Compliance Tracker,'' there are 
five active submissions, as well as a number of closed submissions, 
some of which have resulted in a factual record. Does the Interagency 
Environment Committee plan to review any of these allegations for 
potential enforcement actions?

    Is the committee open to reviewing direct submissions of alleged 
USMCA environmental violations from the public for issues outside of 
the Customs Verification Agreement?

    Answer. USTR actively participates in the review of environment 
submissions alleging failures to effectively enforce environmental laws 
under all of the U.S. FTAs. This practice will continue moving forward 
and will include a review by the Interagency Environment Committee of 
public submissions.

    USTR has established an email address on the USTR website to 
receive public comments ([email protected]). All public 
comments will be shared with the Interagency Environment Committee for 
review and, if appropriate further action.

    Question. I understand that some in the administration are in favor 
of mandating Buy America requirements for medicines and other products. 
I'm concerned that this would result in retaliation from our trading 
partners and set up a situation where every country has to have the 
ability to produce the same medicines. In my view, we should instead be 
thinking about cross-border resiliency and leveraging our trading 
relationships with allies. After all, we're now implementing an updated 
trade deal with Mexico and Canada, and negotiating a deal with the UK. 
According to the FDA, the U.S., EU, and Canada together make up 54 
percent of the world's manufacturing facilities that produce active 
pharmaceutical ingredients (APIs) and 69 percent of the world's 
facilities producing finished dosage forms.

    Do you agree that we need to work with our allies and trading 
partners when it comes to shoring up our supply chains and ensuring 
supply chain resilience?

    Answer. I agree to a point. The COVID pandemic has magnified the 
importance of bringing manufacturing back to the United States to 
ensure we are able to meet the critical needs of our country and our 
citizens. It has also highlighted the risks we face due to our reliance 
on foreign supply chains. During the height of the COVID crisis, even 
our allies in Europe were restricting supply of personal protective 
equipment.

    USMCA demonstrates how we can work with our allies and trading 
partners on supply chain resilience and bring manufacturing back to the 
United States. Ultimately, we need to continue to use all the policy 
tools available to incentivize U.S. companies to manufacture in the 
United States.

    Question. The administration has previously considered and rejected 
imposing section 301 tariffs on certain medicines and medical products, 
and has created a special process for excluding COVID-related products 
from tariffs.

    Is this due to a concern that tariffs would negatively impact 
patients?

    Would you agree that we should think differently about health care 
than about other types of products when it comes to tariffs and trade 
restrictions, given the impact on patients?

    Answer. Determining an appropriate action under section 301 
involves a balance between the most effective action to obtain the 
elimination of the unfair act, policy, or practice, and minimizing any 
adverse effects on U.S. interests. To assist in achieving the 
appropriate balance, USTR conducts a notice and comment process on 
possible trade actions and possible modifications to trade actions, and 
carefully considers all public input. As part of this balance, USTR 
considers whether a product may be needed for medical purposes, 
including to respond to the COVID pandemic. USTR also consults closely 
with the Department of Health and Human Services.

    Question. In April of this year, USTR issued a 2020 Special 301 
Report reviewing the status of our trading partners' intellectual 
property (IP) protection and enforcement.

    How will USTR work to encourage the countries cited in the report 
to make positive changes to be removed from the 2021 list?

    Answer. USTR will engage with the countries cited in the 2020 
Special 301 Report and will use all appropriate trade tools to ensure 
that they address U.S. intellectual property protection and enforcement 
concerns. In particular, the administration continues to closely 
monitor developments in, and to engage with, those countries that have 
been on the Priority Watch List for multiple years. For countries 
failing to address U.S. concerns, USTR will take appropriate actions, 
which may include enforcement actions under Section 301 of the Trade 
Act or pursuant to World Trade Organization (WTO) or other trade 
agreement dispute settlement procedures.

    Question. U.S. drug companies continue to face a challenging IP 
environment in China. The Phase One agreement committed China to 
protecting the patents of innovative drugs from the U.S., specifically 
by establishing a patent dispute resolution mechanism for biologic 
drugs before the end of this year.

    What is USTR's plan to engage China to ensure timely and effective 
implementation of this provision in the Phase One agreement?

    Answer. Robust protection of intellectual property is critical to 
incentivizing the development of new and innovative treatments and 
cures. The intellectual property chapter of the Phase One agreement 
requires China to establish a mechanism for the early resolution of 
potential pharmaceutical patent disputes, including a cause of action 
to allow a patent holder to seek expeditious remedies before the 
marketing of an allegedly infringing product, so that innovative 
pharmaceutical companies can effectively enforce their rights. On July 
3, 2020, China issued revised draft Patent Law Amendments that begins 
to outline this mechanism. USTR is regularly engaging with Chinese 
counterparts to ensure full implementation of China's Phase One 
agreement obligations in this areas.

    Question. Last year, the administration terminated India's 
designation as a beneficiary developing country under the Generalized 
System of Preferences (GSP) program due to market access issues. 
Despite ongoing negotiations, from India's actions on data 
localization, data protection and most recently, digital tax, it 
appears that the country is increasingly moving in the wrong direction 
on digital policy in a way that harms U.S. interests.

    What is the status of U.S. trade negotiations with India to address 
India's market access issues and restore the country's participation in 
the GSP program?

    How are these negotiations seeking to resolve India's barriers on 
digital services?

    Answer. We are currently engaging the government of India to 
address a range of trade barriers, including the market access issues 
that led to the termination of India's GSP beneficiary status. We 
continue to take actions to address concerns about policies that may 
discriminate against or disadvantage American companies, including 
launching a section 301 investigation of India's digital services tax.

    Question. The coronavirus is a global pandemic affecting the public 
health and economies of countries around the world, and all countries 
are in dire need of a vaccine to prevent further deaths and to spur 
economic growth. In March, President Trump reportedly offered a German 
company, CureVac, more than a billion dollars to produce a vaccine 
exclusively for the United States. If true, the President's 
intervention with CureVac to secure a vaccine exclusively for the 
United States' use is not only deeply immoral, but it also damages the 
trust and long-term diplomatic relationships that the U.S. has with our 
allies.

    Are you aware of any past or ongoing efforts by the administration 
to intervene with vaccine development for the coronavirus in other 
countries, such as what has been reported with the German company 
CureVac?

    Answer. No.

    Question. In a recent phone conversation with you, I highlighted my 
concerns that Mexico seems to be moving away from a science based 
regulatory system to one based on the precautionary principle--similar 
to the European Union. Since our conversation, we have seen no pullback 
by Mexico. In fact, recent comments by the head of Mexico's 
environmental agency, Secretary Victor Toledo, indicate that at least 
some in Mexican President Andres Manuel Lopez Obrador's administration 
are trying to accelerate this movement.

    What is USTR's plan for addressing this issue now that USMCA has 
entered into force?

    Answer. We continue to engage with Mexican officials at high levels 
to address these concerns, aiming to resolve these problems for 
American agriculture. If we are unable to resolve these issues, we are 
prepared to take enforcement actions to hold Mexico to its obligations 
under the agreement, if necessary.

    Question. It is my understanding that there are dozens of crop 
protection registrations and label changes currently delayed in Vietnam 
because Vietnam is refusing to accept data from laboratories in the 
U.S. and a few other countries that has been generated following 
internationally recognized good laboratory practices (GLP) standards.

    What steps is USTR taking to address this issue that U.S. companies 
are experiencing in Vietnam?

    Answer. We are aware of the concern regarding delays in Vietnam's 
review and approval of crop protection product registration dossiers 
from both U.S. and foreign-based companies. In addition, we are 
concerned that Vietnam does not recognize U.S. laboratories conducting 
the toxicology tests as GLP-certified laboratories, even though the 
labs are recognized by the OECD. The U.S. government, including USTR 
and USDA, has been engaging with representatives from crop protection 
companies in the United States and Hanoi and the Vietnamese Government 
and will continue to urge Vietnam to address this issue.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
    Question. It is well-documented that the Chinese government has 
pursued systemic policies to eradicate the culture and religion of the 
Uyghurs. Reports indicate that tens of thousands of Uyghurs are subject 
to forced labor conditions in the Xinjiang Province as part of this 
Chinese government policy. The Australian Strategic Policy Institute 
(ASPI) identified 27 factories in the province that contribute to the 
supply chain of dozens of well-known brands, including Nike, Apple, 
H&M, and others. CBP has issued two Withhold Release Orders for hair 
products from producers in the Xinjiang Province on May 1, 2020 and 
June 17, 2020, but other imports from Xinjiang Province do not appear 
to be covered by WROs.

    Does USTR believe products are being imported to the U.S. that were 
made with Uyghur forced labor? What actions is USTR taking to address 
Chinese government-mandated forced labor among the Uyghurs and to 
prevent imports produced with forced labor from entering the U.S. 
market? Has USTR raised this issue with any of the retailers named in 
the ASPI report? If not, why not? Has USTR raised this issue with the 
Chinese government? If not, why not?

    Answer. I take seriously the United States' commitments to address 
forced labor under U.S. law. USTR officials have had numerous 
discussions with U.S. businesses regarding forced labor in China. USTR 
also participates in a number of intra-
governmental initiatives that work to address forced labor in China and 
is part of the U.S. government's whole-of-government enforcement work 
in this area. USTR is a member of both the Forced Labor Enforcement 
Task Force and the DHS Forced Labor Interagency Working Group and 
collaborates with Customs and Border Protection (CBP) on its 
enforcement of the forced labor import prohibition in section 307 of 
the Tariff Act of 1930. Since passage of the Trade Facilitation and 
Trade Enforcement Act of 2015, CBP has issued eight Withhold Release 
Orders addressing goods made with forced labor in China. USTR also 
participates in a White House task force to monitor the situation of 
forced labor in the Xinjiang Province of China. The administration has 
announced a number of actions in response to the abuses in Xinjiang, 
including Department of State visa restrictions on Chinese government 
officials and Department of Commerce entity listings.

    Question. Recent news reports detailed efforts by two USTR 
employees--who were responsible for developing the USMCA auto rules of 
origin--to solicit auto sector clients for a business venture they 
planned on starting after leaving USTR. The business venture advertised 
the USTR employees' services to help auto companies comply with the new 
auto rules of origin in USMCA.

    Given these apparent conflicts of interests, what measures is USTR 
taking to ensure there are no conflicts of interest in USTR's 
implementation of the auto rules of origin, including in the approval 
of alternative staging regimes requested by auto companies?

    Answer. As I state in my answers to questions from Senator Wyden, I 
do not think former USTR employees should be able to lobby USTR right 
after leaving, and I would support efforts to change the rules in order 
to prevent that from happening. USTR will assess requests for 
alternative staging regimes submitted by companies consistent with the 
terms of the USMCA and guidance provided to the public in the Federal 
Register notice. It will be a fair and neutral process.

    Question. Article 8 of Chapter 4 of the USMCA provides for the 
approval of alternative staging regimes that allow auto producers to 
qualify for USMCA benefits even if they do not meet USMCA's auto rules 
of origin. Paragraph 3 of Article 8 limits alternative staging regimes 
to not more than ten percent of a producer's total passenger vehicle or 
light truck production. The agreement allows the Parties to increase 
the number of eligible vehicles for a producer if certain conditions 
are met.

    Does USTR expect any of the alternative staging regimes to cover 
more than 10 percent of an auto producer's total passenger vehicle or 
light truck production? If so, does USTR expect the majority of 
approved alternative staging regimes to cover more than ten percent of 
an auto producer's total passenger vehicle or light truck production?

    Did the Parties agree to increase the ten percent limitation on an 
across-the-board basis? If not, how is an exception to the ten percent 
limitation being applied?

    What was the process by which the Parties agreed to increase the 
ten percent limitation? Please provide any relevant documentation that 
reflects the decision-
making process between the U.S., Canada, and Mexico on increasing the 
10-percent limitation.

    Answer. On April 21, 2020, USTR published a notice in the Federal 
Register that invited interested passenger vehicle and light truck 
producers to submit requests for alternative staging. The deadline for 
submissions was July 1, 2020. USTR is currently reviewing all petitions 
and anticipates making final decisions, based on the criteria in the 
agreement, by August 31, 2020.

    Article 8.3 of the USMCA provides for the parties to accept 
petitions for alternative staging for more than 10 percent of total 
North American production, if the producer has a ``detailed and 
credible plan to ensure these vehicles will meet all the requirements 
set out in Articles 1 through 7 within 5 years.'' We will consider all 
requests for alternative staging in line with the provisions in the 
USMCA.

    Question. Mexico's labor law reforms took effect on May 2, 2019.

    Since the labor law reforms took effect, what are the areas in 
which USTR believes Mexico has made the most progress in and been the 
most effective at implementing them? In what areas has Mexico made the 
least progress and been the least effective at implementing the labor 
law reforms? Does USTR believe Mexico remains on track to meet its 
labor obligations under Annex 23-A of the USMCA? What are the biggest 
impediments to Mexico living up to its obligations under USMCA?

    Answer. We believe that the Mexican Government is committed to the 
labor reform process. Mexico plans to open the new Labor Courts and 
administrative bodies in one-third of its states by October of this 
year, which is ahead of what is mandated under the labor reform 
legislation. Under the May 2019 labor reforms, Mexico's new Federal 
Center must begin registering unions and CBAs by May 2021, its new 
local labor courts and local conciliation centers must begin operating 
by May 2022, and new Federal labor courts and conciliation centers must 
begin operating by May 2023. The creation of these new institutions is 
challenging, but we believe that they are on track to meet the required 
timeline. We are working closely with Mexico and the Department of 
Labor is providing technical assistance to support this process.

    Question. Labor lawyer and activist Susana Prieto was arrested 
nearly a month ago on charges of inciting violence at a protest and 
threatening public officials. She was released from jail this week, not 
coincidentally on the day the USMCA entered into force. The charges 
against her have not yet been dropped, though she denies them.

    Did USTR weigh in with the Mexican government on Prieto's arrest? 
Did USTR ask for her to be released from jail? Does USTR believe 
Prieto's arrest to be indicative of the Mexican government's commitment 
to implementing its labor law reforms? If not, why not?

    Answer. USTR has worked closely with Department of State staff in 
the U.S. Embassy in Mexico City and the U.S. Consulate in Matamoros to 
monitor Ms. Prieto's case. Throughout, we have emphasized to the 
Mexican government the importance of respect for due process. In that 
regard, I note that the Mexican Secretariat of Labor and National Human 
Rights Commission issued statements directed to the Matamoros 
government to respect Ms. Prieto's constitutional and due process 
rights. We are continuing to follow the situation closely together with 
the Departments of State and Labor and other members of the USMCA 
Interagency Labor Committee.

    Question. The USMCA implementing legislation (Pub. L. 116-113) 
provided $30 million in appropriations to USTR during FY20-FY23 for the 
purpose of monitoring compliance with labor obligations.

    Has USTR developed a spend plan for that funding yet? If so, please 
provide documentation of that spend plan. If not, when does USTR expect 
to develop that spend plan?

    Answer. USTR is using this funding to increase our capacity to 
monitor and enforce compliance with USMCA labor obligations in a number 
of ways. We have hired additional staff in USTR's Office of Labor 
Affairs and Office of the General Counsel. USTR is dedicating funding 
to support the work of rapid response mechanism and state-to-state 
dispute settlement panels for labor cases. We are detailing a Senior 
Trade Representative to Mexico and will pay the office and logistical 
support expenses for that person, as well as the USMCA labor and 
environmental attaches, in Mexico. USTR will fund the operational costs 
of the USMCA Independent Mexico Labor Expert Board. We also are 
reviewing investments in technical and technological tracking tools 
that will facilitate monitoring and enforcing USMCA labor commitments.

    Question. USTR's published negotiating objectives for the Kenya FTA 
do not include sustainable or equitable economic development in Kenya 
as a stated objective of the negotiations.

    Is sustainable, equitable economic development in Kenya a USTR 
objective for the talks? If so, what U.S. FTA, in this administration's 
view, has best achieved equitable growth in a developing country? On 
what metrics is that assessment based? Will that FTA serve as model for 
the Kenya FTA negotiations?

    Answer. In pursuing an FTA with Kenya, this administration is 
responding to the congressional charge, as expressed in the AGOA 
legislation, to seek reciprocal and mutually beneficial trade 
agreements that serve the interests of both the United States and the 
countries of sub-Saharan Africa.

    Question. Because the Kenya FTA will be the first bilateral FTA 
with an African nation, the negotiations are expected to be lengthy.

    How many years does USTR anticipate the Kenya FTA negotiations will 
take? What topics will be the most difficult in the negotiations and 
why?

    Answer. It is difficult to predict how quickly the negotiations 
could be completed, as that will depend on numerous factors. It is 
similarly difficult to foresee which issues will be the most 
challenging. As in any such negotiation each side will have its 
ambitions and its sensitivities, and over the course of the talks we 
will identify them and seek to work through them.

                                 ______
                                 
            Questions Submitted by Hon. Robert P. Casey, Jr.
    Question. Can you explain why the Phase One China deal did not 
include provisions to address China's steel overcapacity?

    Answer. The administration is committed to working toward a more 
fair and reciprocal trade relationship with China. In our negotiations 
with China, we decided that the best way forward was to take a phased 
approach to addressing the structural changes needed in China's trade 
regime. In the Phase One agreement with China, we were able to address 
a wide range of unfair trade practices, including in the areas of 
intellectual property, technology transfer, agriculture, and financial 
services. In Phase Two, we intend to address additional unfair trade 
practices, including those that contribute to excess capacity in the 
steel sector, among others. We remain fully committed to addressing the 
issue. USTR is also actively engaged with like-minded trading partners 
in the Organisation for Economic Co-operation and Development and the 
World Trade Organization in an effort to bring greater transparency and 
discipline to the types of market-distorting measures that contribute 
to excess capacity in steel and other industrial sectors.

    Question. Pennsylvania's Attorney General, Josh Shapiro, has raised 
the issue of fake respirator masks and potentially counterfeit or 
dangerous medicines making their way into Pennsylvania and the United 
States.

    These reports of fraudsters taking advantage of the COVID epidemic 
to send fake medicines and medical equipment to the United States 
highlights how critical it is for USTR and Customs to be adequately 
resourced and for us to support the protections that allow CBP to stop 
fakes before they reach consumers. Can you discuss the steps are you 
taking to ensure American intellectual property is protected, and 
ensure the health and safety of Americans.

    Answer. The manufacture and distribution of pharmaceutical 
products, active pharmaceutical ingredients, and medical equipment 
bearing counterfeit trademarks has been a growing problem that has 
important consequences for consumer health and safety. Among other 
things, USTR engages with our trading partners to strengthen border 
enforcement against counterfeit goods and, working with U.S. Customs 
and Border Protection as well as other U.S. government agencies, 
identifies through our annual Notorious Markets List illustrative 
examples of online and physical markets that reportedly engage in, 
facilitate, turn a blind eye to, or benefit from substantial copyright 
piracy and trademark counterfeiting.

                                 ______
                                 
               Questions Submitted by Hon. Maggie Hassan
    Question. As companies across New Hampshire and the United States 
take measures to weather this economic crisis, many are also paying 
substantial tariffs that the administration has imposed on imports from 
China. The administration's tariffs were already a major burden prior 
to COVID-19, and I'm concerned about how tariffs are affecting 
businesses during this crisis.

    Has the administration considered revisiting or broadening tariff 
exclusions to provide relief to small businesses?

    Businesses are also paying tariffs on partially exempted products 
like medical goods and personal protective equipment (PPE) imported to 
fight and treat COVID-19 and protect American citizens. While USTR 
granted temporary exemptions on some tariffs levied on imported Chinese 
PPE and medical goods earlier this year, those exemptions are only 
temporary, and business continue to pay non-exempted tariffs rates.

    Is USTR contemplating longer-term extensions of the earlier granted 
exclusions? Is so, for what periods and length of time is USTR 
contemplating for which exclusions?

    Is USTR considering granting additional exclusions to PPE and 
medical goods in addition to those already granted? If yes, what goods 
are under consideration, and for what length of time? If no, why not?

    Answer. USTR recognizes the importance of small business and in the 
exclusions process. Indeed, the exclusion request form asks businesses 
to identify whether they meet the size standards for a small business, 
as established by the Small Business Administration (SBA). In the 
context of examining whether the additional tariffs are causing a 
company severe economic harm, the size of the company is significant to 
that analysis. Additionally, USTR has taken steps to ease small 
business access to the exclusion process. For example, USTR provided a 
single point of contact to provide individual technical assistance to 
requesters and collaborated with SBA to help smaller companies navigate 
the process.

    Prior to a group of exclusions expiring, USTR has issued a Federal 
Register notice asking the public to comment on whether to extend 
particular exclusions from that group. For the exclusions covering PPE 
and medical goods, depending on when the exclusion was initially 
published, USTR has either opened a docket seeking comments on whether 
to extend the exclusion for up to a year or will be opening a docket in 
the coming weeks.

    In February and March, USTR granted a number of exclusions covering 
PPE and medical goods needed to respond to the COVID-19 outbreak. In a 
Federal Register notice published in March, USTR opened up a comments 
docket to assist in evaluating whether, the COVID-19 pandemic called 
for possible additional modifications to the China 301 tariff actions. 
Specifically, USTR requested comments from interested parties with 
respect to whether a particular product covered by the 301 action is 
need to respond to the COVID-19 outbreak. USTR is currently reviewing 
those comments. However, we do not believe that the section 301 tariffs 
were the reason for any shortages. We also believe that it is important 
to incentivize domestic producers of these goods, many of whom have 
just started production.

    Question. The U.S.-Mexico-Canada trade agreement (USMCA) entered 
into effect on July 1st, and this bipartisan trade deal included 
important provisions to cut red tape for small businesses, such as 
making it easier to file customs forms digitally.

    Given how hard small businesses have been hit during this crisis, 
how is the administration ensuring that these provisions provide relief 
to small businesses quickly and effectively?

    Answer. Canada and Mexico are the top two export destinations for 
U.S. small businesses, with approximately 89,492 U.S. SMEs across the 
50 States exporting $61 billion in goods to Canada, and 53,682 U.S. 
SMEs exporting $85 billion in goods to Mexico (2018, latest data 
available). With entry into force of the USMCA on July 1st, small 
businesses will be able to take advantage of beneficial provisions such 
as increased de minimis levels for exports to Canada and Mexico, 
expanded scope of advanced rulings by customs authorities, expedited 
release of express shipments, and strong and effective protection and 
enforcement of IP rights, including by streamlining application 
procedures that impose disproportionate burdens on small businesses. 
Additionally, small businesses can find a panoply of interagency 
information resources on USMCA and additional assistance to help them 
utilize the agreement at www.trade.gov/usmca.

    Question. On June 15th, Canada announced how it will allocate dairy 
tariff-rate quotas (TRQs) among potential Canadian importers of 
American dairy products. However, American producers have expressed 
concerns that Canada distributed the TRQs in a way that discourages 
certain American products from entering the Canadian market. 
Specifically, American producers are concerned that most of the dairy 
TRQs were given to Canadian competitors that have no incentive to 
import American dairy products.

    What is USTR doing to evaluate the Canadian dairy TRQ allocations 
and to enforce the dairy provisions of the USMCA?

    Answer. USTR will be closely monitoring Canada's implementation of 
all its dairy commitments. We are engaging with our Canadian 
counterparts and are ready to take enforcement action through the 
dispute settlement mechanism in the agreement, if necessary.

                                 ______
                                 
           Questions Submitted by Hon. Catherine Cortez Masto
    Question. Businesses in my State have expressed relief for the 
waiver and delays on some tariffs as a result of the COVID-19 pandemic, 
however, many will continue to struggle long after the country 
proclaims it is open for business and remain uncertain about what the 
expectations will be going forward.

    Have you, or are you planning to, recommend further delays or 
waivers of tariffs on businesses and industries particularly hard hit 
by the pandemic?

    Answer. We are aware of the severe economic impact of the COVID 
crisis on American businesses and want to do what we can to speed their 
recovery. At the same time, we want to avoid doing anything that might 
incentivize imports or undercut the competitiveness of Made-in-USA 
products.

    On April 22, 2020, the Department of the Treasury and the 
Department of Homeland Security announced a limited duty deferment. The 
administration believes this limited deferment strikes the right 
balance between ameliorating financial hardships to U.S. companies 
resulting from the pandemic and protecting both current U.S. 
manufacturing and suppliers. With respect to China 301 tariffs, USTR 
has a process for granting exclusions where a determination can be made 
that such an exclusion will help our Nation's response to the pandemic.

    Question. One of the decisive factors in support from members of 
this committee on USMCA was including strong labor provisions such as 
those proposed by Senators Brown and Wyden.

    What enforcement mechanisms are currently being implemented and 
what is your timeline to bring all of the provisions online to ensure 
we are preserving and protecting American labor?

    Answer. All USMCA enforcement mechanisms are available and ready to 
be utilized as of the agreement's entry into force on July 1st. This 
includes the state-to-state mechanism and the rapid response labor 
mechanism championed by Senators Brown and Wyden. In addition, we have 
hired additional staff in USTR's Office of Labor Affairs and Office of 
the General Counsel to increase our capacity for monitoring and 
enforcement of the USMCA labor provisions. The Department of Labor also 
has selected three labor attaches to be based in Mexico City and is 
hiring additional staff in Washington, all to support the Interagency 
Labor Committee. As I mentioned in my hearing before your committee, we 
will not hesitate to utilize the USMCA enforcement tools.

    Question. More travelers visit Nevada from the UK than any other 
country except for Canada and Mexico. Nearly three quarters of a 
million people visit Las Vegas alone each year.

    Where can the tourism and hospitality industry factor into your 
negotiations with the UK? What new benefits to the Nevada community, 
specifically, could come from achieving an agreement with our 
historical friend and ally?

    Answer. A comprehensive trade agreement between the United States 
and the UK will further expand our already deep economic and commercial 
relationship, including in the important tourism and hospitality 
industries. This strengthening of our economic relationship should also 
translate into an increased demand for business travel and tourism as 
well as more participation in conventions and trade shows in venues 
across the country, including in Nevada.

    Question. In testimony, you stated that bilateral trade agreements 
put forth by the Trump administration have ``secured enforceable 
commitments from China to cease its abusive trade practices,'' yet 
evidence suggests that China is falling short of reaching Phase One 
commitments.

    Would these agreements put more pressure to make concessions and be 
more enforceable if they involved multilateral negotiations, including 
our allies? How is an agreement that excludes our allies better than 
one that includes them?

    Answer. I am committed to using the most effective available tools 
to address unfair trade policies that harm U.S. workers, businesses, 
farmers, and ranchers. We have made extensive efforts to coordinate 
with like-minded trading partners. For example, I launched a trilateral 
process with Japan and the EU to address China's non-market-oriented 
policies and practices that lead to severe overcapacity, create unfair 
competitive conditions for their workers and businesses, hinder the 
development and use of innovative technologies, and undermine the 
proper functioning of international trade and discussed various tools 
needed to deal with these problems. And while discussion can be 
helpful, it is no substitute for taking effective action that seeks to 
change China's practices that damage U.S. workers and businesses. I 
have not hesitated to take action to directly address unfair and 
harmful trade policies, such as China's policies regarding technology 
transfer, intellectual property, and innovation. Our allies, 
unfortunately, are not always willing to coordinate and work with us, 
such as the EU's decision to side with China in a WTO dispute on the 
section 301 action to address China's forced technology transfer.

    Question. Our partners and allies, especially in the Asia-Pacific, 
are facing increased pressure from China. For example, last month, 
after the Australian prime minister voiced support for an investigation 
into the origins of COVID-19, the Chinese Government imposed 80-percent 
tariffs on Australian barley and stopped accepting beef from four large 
Australian slaughterhouses. One of the key ways we can counter China's 
rising influence is to strengthen our partnerships with these 
countries, which will be critical for our current and future economic 
outlook.

    How is the administration prioritizing working with our Asia-
Pacific partners like Australia that are facing Chinese government 
pressure?

    Answer. Under the Trump administration's Indo-Pacific strategy, the 
United States works with countries across Southeast Asia and the 
Pacific to strengthen regional trade and security. In support of these 
objectives, the United States regularly engages countries in Southeast 
Asia and the Pacific. In addition to the FTAs with Australia and 
Singapore, the United States currently has bilateral trade and 
investment framework agreements (TIFAs) with Brunei, Burma, Cambodia, 
Indonesia, Laos, Malaysia, New Zealand, Philippines, Thailand, and 
Vietnam. The United States also engages the region through the U.S.-
ASEAN TIFA, which brings together all 10 ASEAN states for a dialogue on 
trade and investment.

    USTR's activities in the region focused on confronting structural 
barriers, leveling the playing field for U.S. exporters, countering 
China's economic influence in the region, and targeting unfair trade 
practices that underpin trade deficits.

    Question. The COVID-19 outbreak has shown how much the world relies 
on China for pharmaceuticals and medical equipment, especially when it 
comes to active pharmaceutical ingredients for manufacturing drugs. Our 
allies like Japan and France are also looking at this issue to try to 
see how they can lessen their reliance on imported medical supplies 
from China.

    Will this issue have an impact on trade negotiations with China? 
How will the United States and its allies' efforts to improve drug 
manufacturing independence affect global trade with China?

    Answer. If there is one lesson to be drawn from this crisis, it is 
that dependence on other countries, especially ones like China, as the 
source of key medical products has created a strategic vulnerability 
for the United States. This administration's economic and trade 
policies are helping to overcome that vulnerability by encouraging 
diversification of supply chains and--better yet--more manufacturing in 
United States.

                                 ______
                                 
               Questions Submitted by Hon. Mark R. Warner
    Question. For several months, my staff had sought USTR's response 
on a number of questions related to USTR's interpretation of the safe 
harbor and its impact on a number of foreign efforts to hold platforms 
accountable. After months of silence from USTR, your staff finally 
responded--just before Memorial Day weekend--to suggest that USTR would 
potentially consider changes to the safe harbor to address the concerns 
of members of Congress like me. Over the Memorial Day weekend, my staff 
worked diligently with civil rights litigators, online abuse experts, 
and consumer protection advocates to generate a redline to the safe 
harbor that would address the concerns we have. In the month since we 
sent that redline, however, we haven't heard anything from USTR.

    Have you seen these suggested revisions to the text and are you 
willing to incorporate them into any safe harbor provision you advance 
in these negotiations?

    Answer. USTR appreciates the feedback that you and your staff have 
provided on the issue of non-IP civil liability provisions in trade 
agreements, and we look forward to continued engagement on this issue. 
While a provision addressing the non-IP civil liability of interactive 
computer service suppliers can play an important role as one element of 
comprehensive, high standard digital trade rules, we agree that any 
such provision must provide flexibility for the Congress, the 
administration, and our negotiating partners to evolve policy and law 
in response to new challenges.

    Question. With bipartisan opposition to inclusion of this safe 
harbor in the U.S. Congress, along with widespread opposition in the 
British Parliament, why is USTR using considerable political capital--
political capital that could be used to achieve longstanding consensus 
objectives on things like countering Huawei--to include this 
controversial platform safe harbor?

    Answer. As noted above in response to your first question, we 
believe that a provision addressing the non-IP civil liability of 
interactive computer service suppliers can play an important role as 
one element of a broader set of comprehensive, high-standard digital 
trade rules to facilitate the continued growth of the U.S. economy and 
to support innovative Internet-based business models. At the same time, 
we recognize that any such provision in a trade agreement must provide 
flexibility for the Congress, the administration, and our negotiating 
partners to evolve policy and law in response to new challenges.

    Question. On what basis do you think it is inappropriate to make 
clear that the platform safe harbor shouldn't negate anti-
discrimination and human rights laws, or immunize platforms where they 
are actively facilitating--and receiving compensation for--harmful and 
fraudulent activity like advertisements for online scams?

    Answer. We recognize that governments, when developing and 
instituting safe harbors relating to non-IP civil liability for 
Internet platforms, should have flexibility to ensure that any such 
regime can evolve in response to new challenges and can address 
legitimate public policy goals such as the ones that you have cited. We 
look forward to continuing to work to ensure that any trade provisions 
in this area reflect the need for such flexibility.

    Question. For several years now, I have called for a strong--and 
ideally multilateral--effort to address the range of unfair and 
aggressive trade practices of the People's Republic of China.

    Chief among my concerns have been continued use of economic 
espionage by the Chinese government, significant subsidies--both in the 
form of economic support and political patronage--for national 
champions like Huawei, and opaque and extra-judicial demands put on 
foreign firms.

    Unfortunately, the President's Phase One deal did not make 
meaningful headway on any of these pressing areas--choosing instead to 
push China to make a range of purchase commitments on American 
commodity products. Four months into the agreement, we have seen a 
range of reports indicating China's unwillingness to abide by even 
these commitments--with no meaningful mechanism, aside from 
consultations, to enforce these commitments.

    The lack of focus on China's continued use of economic espionage 
has come into sharper focus in recent weeks, after the FBI confirmed 
that they were investigating Chinese state actors hacking of U.S. and 
Western vaccine research in connection with the COVID-19 pandemic.

    What confidence can we have that a Phase Two deal would 
meaningfully address economic espionage--and what kind of enforcement 
mechanism is the administration prepared to push the Chinese to accept?

    Answer. The serious problem of economic espionage conducted by 
China has been identified in a White House report, ``How China's 
Economic Aggression Threatens the Technologies and Intellectual 
Property of the United States and the World.'' I agree with you on the 
importance of doing all we can to combat China's actions. While matters 
related to economic espionage generally fall under the domain of law 
enforcement rather than trade agreements, our trade negotiations with 
China have centered on the troubling area of China's technology 
acquisition policies.

    With regard to our trade negotiations with China, our Phase One 
agreement not only addressed a range of purchase commitments from 
China, but also addressed structural reforms and other changes to 
China's economic and trade regime in the areas of intellectual 
property, technology transfer, agriculture, financial services, and 
currency and foreign exchange.

    We address China's policy goal of technology acquisition in our 
Phase One agreement in the area of technology transfer, where the 
agreement addresses several of the unfair trade practices of China that 
were identified in USTR's section 301 report. For the first time in any 
trade agreement, China agreed to end its longstanding practice of 
forcing or pressuring foreign companies to transfer their technology to 
Chinese companies as a condition for obtaining market access, securing 
administrative approvals or receiving advantages from the Chinese 
government. China also committed to provide transparency, fairness, and 
due process in administrative proceedings and to ensure that technology 
transfer and licensing take place on market terms. Separately, China 
also committed to refrain from directing or supporting outbound 
investments aimed at acquiring foreign technology pursuant to its 
distortive industrial plans.

    In our Phase Two negotiations with China, we will seek to address 
additional problematic Chinese behavior, including state-sponsored 
cyber-theft. Like the Phase One agreement, a Phase Two agreement would 
need to include a strong enforcement mechanism.

    Question. What conversations have you had through the inter-agency 
related to China's economic espionage efforts relating to vaccine 
research? Doesn't this heighten the need for multilateral 
coordination--as China's efforts are no doubt aimed at German, French, 
and British vaccine research as well?

    Answer. As noted in my response to the question above, the serious 
problem of economic espionage conducted by China has been identified in 
a White House report, ``How China's Economic Aggression Threatens the 
Technologies and Intellectual Property of the United States and the 
World.'' The administration closely coordinates in its interagency and 
collaborates with other nations where appropriate on these matters, 
which generally fall under the domain of law enforcement rather than 
trade agreements.

    Question. It is no secret that China continues to pose serious 
threats to U.S. national and economic security, while largely closing 
or conditioning access to its own domestic market to American 
companies.

    We must strengthen U.S. leadership in key technologies--both at 
home and abroad. Here at home, I'm working to restore American 
leadership in semiconductor research, development and fabrication. Last 
week, together with a bipartisan group of Senators and members of the 
House, I introduced legislation that will provide tens of billions to 
help enhance America's edge in one of the most strategic industries--
semiconductors.

    The CHIPS for America Act will help to ensure America's long term 
national security and economic competitiveness by providing foreign 
microelectronic companies the incentive to invest in the U.S. as well.

    And abroad, we must continue to insist that China open its market 
to U.S. technology. One such example of this is cloud services. U.S. 
cloud providers are some of the world's leading innovators, providing 
millions of high-skilled and high-wage jobs. While U.S. cloud providers 
have been at the forefront of the movement to the cloud in virtually 
every country in the world, China has blocked them.

    Showing just how weak the Phase One deal was on the technology 
transfer front, China still requires U.S. cloud providers to transfer 
valuable U.S. intellectual property, surrender use of their brand 
names, and hand over operation and control of their business to a 
Chinese company in order to operate in the Chinese market.

    Chinese cloud providers are free to operate and compete in the U.S. 
market, and U.S. cloud providers should benefit from the same 
opportunity in China. I strongly believe that it is important for the 
U.S. government to prioritize this issue in any potential Phase Two 
China deal.

    Can you can provide us an update today on China's Phase One 
purchase commitment regarding cloud services, and also speak to your 
views on restoring American leadership in semiconductor manufacturing?

    Answer. Under Chapter 6 of the Phase One agreement, China committed 
to increase its purchases of U.S. cloud and related services 
substantially in 2020 and 2021. USTR continues to track China's 
implementation of its services purchases commitments very closely. 
Trade data indicates that China is making good progress in fulfilling 
its commitments as they relate to the cross-border supply of cloud and 
related services. At the same time, the United States remains very 
concerned about China's lack of reciprocity in opening its cloud 
services market. The United States anticipates that the Phase Two 
negotiations with China will include a focus on services market access 
issues that were not addressed in the Phase One agreement, including in 
the area of cloud services.

    I agree with you on the critical importance of America's 
semiconductor manufacturing industry. Semiconductors are one of the top 
five U.S. export sectors, and they are critical to advancing innovation 
in virtually all sectors of the U.S. economy--from automobiles to cell 
phones to medical devices. Semiconductors are a specific target of 
China's unfair and harmful industrial policies. In fact, China has 
openly stated its intention of achieving global dominance in advanced 
technology, as set forth in industrial plans such as ``Made in China 
2025.'' To this end, the Chinese government has launched an initiative 
to develop an indigenous, self-contained semiconductor industry--an 
initiative calling for government-directed funding in the tens of 
billions of dollars, with some estimates of over $150 billion. If 
China's policies go unanswered, the U.S. industry will lose its 
scientific and technological advantage. In addition, supporting our 
domestic semiconductor industry to increase and to bring back 
manufacturing to the United States is a key component to maintain a 
U.S. technological lead in the future.

    Question. COVID-19 has refocused many of our priorities. Your 
office took action in early March to exempt many medical and personal 
protective equipment items from tariffs. However, the list of 
approximately 200 goods did not include many desperately needed medical 
and PPE goods. In late March your office began a review of potentially 
new PPE exemptions, which recently closed for comments.

    What steps has your office taken to exempt critically needed items 
like tests and personal protective equipment? Why has your office not 
accelerated these exemptions given the urgent need for readily 
available PPE?

    Answer. As you note, in February and March, USTR granted a number 
of exclusions covering PPE and medical goods needed to respond to the 
COVID-19 outbreak. Additionally, in a Federal Register notice published 
in March, USTR opened a comments docket to assist in evaluating 
whether, the COVID-19 pandemic called for possible additional 
modifications to the China 301 tariff actions. USTR continues to 
consider the comments submitted. However, there is no evidence that the 
additional 301 tariffs are causing a shortage. In June, the 
International Trade Commission issued a report identifying COVID-19 
Related Goods. Of the 112 10-digit tariff lines identified in the 
report, more than half of the lines (69) were either never subject to 
the 301 tariffs or have been excluded entirely, and an additional 18 
lines have one or more product exclusions. Additionally, I do believe 
that it is important to incentivize domestic producers to produce these 
goods.

    Question. The Trump administration has touted the purchase 
requirements included in the Phase One deal with China; however, there 
is evidence that they have fallen behind on several obligations and 
particularly on their energy purchases. There are also reports that 
China has begun sheltering its domestic coal production with import 
restrictions and that shipments of U.S. coking coal have dwindled in 
the past few months to essentially zero.

    Is your office confident that China will meet its obligations in 
the light of increased protectionist policies in the energy space? Has 
your office begun any efforts toward dispute resolution to address the 
limited Chinese efforts to meet these obligations?

    Answer. China's commitments to purchase U.S. energy products are 
annual commitments for calendar years 2020 and 2021, so we will not be 
able to assess definitively whether China has fulfilled these 
commitments for 2020 until the end of this year. At the same time, we 
have been following China's progress in purchasing U.S. energy products 
very closely and have been discussing our concerns with our Chinese 
counterparts as they arise. We have made it clear that China needs to 
find a way to satisfy all of its purchase commitments under the Phase 
One agreement.

    Question. In April 2019, your office initiated a section 301 
investigation to enforce U.S. rights in the World Trade Organization 
dispute against the EU and certain EU member States related to 
subsidies on large civil aircraft. As part of this action, your office 
announced tariffs on certain products from the EU, including 25-percent 
tariffs on wine from France, Spain, Germany, and the United Kingdom. 
Your office is also regularly reviewing these tariffs and has 
contemplated tariffs as high as 100 percent on wine from France, Spain, 
Germany, and the United Kingdom, as well as from places such as Italy 
and Portugal.

    In a separate action earlier this month, your office launched 
another section 301 investigation with respect to Digital Services 
Taxes adopted or under consideration by Austria, Brazil, the Czech 
Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, 
and the United Kingdom. This investigation could presumably lead to the 
consideration of yet further tariffs on European wines.

    Wine imports and related supply chains support millions of American 
jobs and touch millions of American consumers. In Virginia alone, 
approximately 60,000 people depend on the production, distribution, and 
sale of wine and spirits products for their livelihood. As you know, 
the COVID-19 pandemic has devastated many of these jobs.

    COVID-19 has wreaked havoc across the United States. The National 
Restaurant Association indicates that the restaurant industry has lost 
$120 billion in sales during the last 3 months, and losses could reach 
as high as $240 billion by the end of the year. Wine and spirit sales 
provide on average 25 percent of a typical restaurant's income, and 
estimates indicate wine distributor sales have collapsed 50-60 percent 
due to restaurant closures.

    As part of your review of tariffs in the large civil aircraft 
dispute, will your office consider the potentially catastrophic 
circumstances facing the food and wine industry today, the impact that 
tariffs have on sales, and the industry's capacity to rebuild following 
these extraordinary events?

    Answer. Determining an appropriate action under section 301 
involves a balance between the most effective action to obtain the 
elimination of the unfair act, policy, or practice, and minimizing any 
adverse effects on the U.S. economy. To assist in achieving the 
appropriate balance, USTR conducts a notice and comment process on 
possible trade actions, and carefully considers all public input. 
Regarding further review of the LCA action, USTR has established a 
process where interested persons can submit comments on the action, and 
comments are currently being accepted through July 26th. Among other 
matters, USTR specifically invited comments regarding potential 
disproportionate economic harm to U.S. interests, including small or 
medium-size businesses and consumers. USTR will continue to consider 
public comments concerning potential effects on the U.S. economy when 
considering any further action to take in the investigation.

    Question. Because of the three-tier system regulating the sale of 
alcohol in the United States, the section 301 tariffs on imported wines 
from Europe do more financial harm to U.S. businesses than to those in 
the EU. When you factor in restaurant sales, estimates indicate up to 
85 percent of the dollars from the sales of these wines stay with U.S. 
businesses.

    Is USTR concerned that tariffs on EU wines may not be as 
effective--causing more harm domestically than on their intended 
target--and particularly taxing to smaller, independently owned 
restaurants and small wholesalers and importers, at a time when the 
hospitality industry is being devastated by the effects of the COVID-19 
pandemic?

    Answer. Determining an appropriate action under section 301 
involves a balance between the most effective action to obtain the 
elimination of the unfair act, policy, or practice, and minimizing any 
adverse effects on the U.S. economy, including small businesses and 
consumers. USTR is currently considering a possible modification to the 
LCA action. Under that process, interested persons can submit comments 
on the action, and comments are currently being accepted through July 
26th. Among other matters, USTR specifically invited comments regarding 
potential disproportionate economic harm to U.S. interests, including 
small or medium size businesses and consumers.

    Question. To what extent does USTR consider downstream American 
jobs when deciding which tariffs to impose following section 301 
investigations? For example, did USTR consider the impact additional 
tariffs on European wine would have on distributors or the restaurant 
industry? Does USTR consider information beyond what is submitted 
through the public comment process?

    Answer. USTR considers all information provided on the public 
record, and has received extensive comments regarding possible impacts 
on wine importers and downstream users.

    Question. Given the small size of its economy, and the vulnerable 
situation under the COVID-19 emergency, why is the administration 
embarking on trade negotiations with Kenya now? How will you ensure 
that these talks do not undermine national development efforts in Kenya 
or regional economic integration in Africa? What is USTR's 
interpretation of the impact of a platform safe harbor on Kenya's 
disinformation laws, which hold platforms liable for the dissemination 
of disinformation?

    Answer. Kenya is an important regional leader and strategic partner 
of the United States. There is enormous potential for us to deepen our 
economic and commercial ties. As with all countries, it is facing the 
challenges posed by COVID-19, but President Kenyatta has expressed that 
he sees an FTA with the United States as important for his country's 
economic future. Such an agreement can help create an enabling 
environment, boost competitiveness, and drive the sort of investment 
that Kenya seeks. Positive investment spillovers to regional partners 
will help reinforce the region's economic integration goals.

    USTR continues to analyze Kenya's disinformation law, but its 
impact remains unclear given the ongoing court challenges that this 
measure currently faces.

                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon
    This is our fourth annual hearing on the Trump trade agenda, which 
means it's the fourth time the committee will hear a familiar old 
routine about Trump getting tough on China and protecting American jobs 
everywhere, the President cracking down once and for all, big changes 
right around the corner, an American economy on the brink of 
transformation. It's been 3\1/2\ years of those big promises. What are 
the results?

    The Phase One deal the President called ``the biggest deal there is 
anywhere in the world by far'' is already coming apart, with China 
falling behind on commitments.

    According to an analysis by the Peterson Institute looking at the 
first 4 months of the deal, China's purchases of U.S. manufactured 
goods were at 56 percent of the target level set by the Phase One deal. 
China's purchases of U.S. agricultural goods were at 38 percent.

    The President said he'd stop the overproduction of steel in China 
that has wiped out so many steel jobs here in the United States. But 
mills in China are producing steel at record levels--up 6.6 percent in 
2018 and 8.3 percent in 2019.

    The President said he'd fix the most damaging ripoffs that target 
American innovation and jobs. But when it comes to IP theft or forced 
technology transfers, the Phase One deal recycled existing law and 
repeated the same promises China has broken many times before.

    According to the Economic Policy Institute, the United States has 
lost 3.7 million jobs to China in the last 2 decades--three-quarters of 
them in manufacturing. Donald Trump has not meaningfully changed any of 
the conditions that allowed that to happen. His biggest accomplishment 
is proving that nobody's better at hyping up a record of consistent 
mediocrity like Donald Trump.

    Bottom line, the status quo under this President is good for China, 
and the Chinese Government is reportedly interested in maintaining it.

    Now let's turn to the new NAFTA. Ambassador Lighthizer and I long 
agreed that NAFTA needed a major overhaul. It wasn't built for a 
digital economy, and it wasn't strong enough on enforcement to protect 
American workers. When the Trump administration first brought its 
renegotiated deal to the Congress, it made progress on digital trade, 
but it didn't go nearly far enough to protect family-wage jobs and 
workers with tough rules on labor and environmental protection. In 
fact, the old, broken-down system of enforcement from the old NAFTA was 
still a part of the Trump administration's new NAFTA. That meant that 
all of the President's boasting about getting a great deal for workers 
was more of the same old happy talk on trade.

    Democrats in the Senate and the House said that was unacceptable 
and got down to work improving those areas where the administration's 
deal fell short. Senator Brown and I worked with our colleagues to 
develop a faster, more aggressive approach to labor enforcement so that 
American workers won't have to spend years waiting for action against 
trade cheats. Ambassador Lighthizer helped us get it done, and now the 
deal is set to go into effect in 2 weeks.

    But the start of the new deal means the work is just getting 
started. Most critically, I have major concerns about Mexico's ability 
to stay on track with implementing the labor obligations, and with our 
ability to monitor and enforce them. The administration absolutely must 
hit the ground running on enforcement on day one.

    There are a few other areas where American businesses, producers, 
and workers need more information and more certainty as the agreement 
goes into effect. Our dairy farmers need to know that their products 
won't face unfair discrimination by Canada and Mexico. American 
innovators need assurances that Mexico will make changes it promised to 
its intellectual property laws. Finally, American automakers need to 
know how USTR and the Department of Labor will apply the auto ``rules 
of origin,'' which impact their supply chains and their ability to 
qualify for tariff benefits.

    The reality is, the new NAFTA made real progress on several key 
issues, and that's why it got overwhelming support from this committee 
and the Senate.

    That progress can be undone if the administration fails to enforce 
the deal--particularly using the enforcement tools the Congress created 
to protect American jobs. This committee will keep a close watch on 
these issues in the weeks and months ahead.

    With that, let me thank Ambassador Lighthizer for joining the 
committee today. I know I'm not the only Democrat on this committee 
who's grateful for his outreach and all his work on a bipartisan basis 
over the last few years. Questions and answers with Bob Lighthizer are 
never dull.

                                 ______
                                 

                             Communications

                              ----------                              


                       American Chemistry Council

                           700 Second St., NE

                          Washington, DC 20002

                             (202) 249-7000

                   https://www.americanchemistry.com/

The American Chemistry Council (ACC) appreciates the opportunity to 
provide a statement for the record regarding the June 17, 2020 hearings 
on the 2020 United States Trade Policy Agenda at the House Ways and 
Means and Senate Finance Committees. These hearings were important 
opportunities for ACC to reflect on the state of U.S. trade policy and 
its impact on the operations, planning, and competitiveness of U.S. 
chemical manufacturers. We would like to offer the following 
perspectives in response to Ambassador Robert Lighthizer's testimony 
and responses to questions, in order to further the debate in the 
Congress on how U.S. trade policy can better serve the U.S. economy, 
businesses, workers, families, consumers, and communities.

Smart U.S. Trade Policy Can Power the Business of Chemistry in the 
United States

The U.S. chemical industry is a $565 billion enterprise, supporting 
more than 25 percent of U.S. gross domestic product (GDP), and 
providing over 542,000 skilled, good-paying American jobs, with 
production in nearly every state. Thirty percent of these jobs are 
export dependent. And because over 96 percent of manufactured goods are 
touched by chemistry, the chemicals industry is the foundation of 
American manufacturing. For the first time in decades, the United 
States enjoys a competitive advantage in chemicals and plastic 
production, made possible by affordable domestic natural gas, the 
industry's primary feedstock.

Since 2010, chemical manufacturers in the United States have announced 
approximately $205 billion of investment in new chemicals and plastics 
domestic manufacturing capacity. More than 60 percent of that capacity 
stems from foreign direct investment. In 2016 and 2017, the chemical 
industry accounted for nearly half of all construction spending in U.S. 
manufacturing. Much of this capacity is intended for export, reflecting 
investors' understanding that the United States is competitively 
advantaged in serving the global marketplace. Due to the shale gas 
revolution, the United States has gone from one of the most expensive 
places to produce chemicals, to one of the world's lowest cost and most 
competitive producers.

American chemical manufacturers today produce 15 percent of the world's 
chemicals. They are one of the top exporting industries in the United 
States, accounting for 10 percent of all U.S. exports, which amounted 
to $136 billion in 2019. The U.S. trade surplus in industrial chemicals 
was $35 billion in 2019. Given the competitive advantage created by the 
American shale gas revolution, that surplus is estimated to grow to $61 
billion by 2024.

In light of the importance that chemical exports have to the industry 
and the national economy, ACC strongly supports trade policy that both 
prevents and addresses barriers to trade and investment. For the U.S. 
chemical industry to succeed in the global marketplace, chemicals trade 
must be allowed to flow freely in and out of the United States in order 
to reach a wide range of global consumers--especially in emerging 
economies--and to compete effectively against significant global 
competition. Market-opening trade agreements level the playing field, 
create a shared path to growth and innovation, and fortify our 
country's relationships with key trading partners. Trade agreements 
also give U.S. chemicals manufacturers continued access to critical 
export markets and allow American firms to import materials and 
chemicals that are essential to U.S. manufacturing, but which may not 
be produced or available in the United States.

U.S. Section 301 and Section 232 Tariffs and Retaliation by Trading 
Partners Continue to Undermine the Competitiveness of U.S. Chemical 
Manufacturers

As of the date of this statement, China is retaliating against over $11 
billion in exports of U.S.-made chemicals in response to the U.S. 
Section 301 tariffs on imports from China. These tariffs impact $20 
billion in imports of chemicals, many of which U.S. chemical 
manufacturers rely on to manufacture chemicals in the United States. 
The European Union, India, and Turkey are applying retaliatory tariffs 
on $1 billion in exports of U.S.-made chemicals in response to the U.S. 
Section 232 tariffs on steel and aluminum imports. The Section 232 
tariffs and quotas have increased the cost of building chemical 
manufacturing plants in the United States and have limited the 
availability of steel necessary for plant construction and maintenance.

It is possible that additional Administration trade actions under 
Section 301 and Section 232 impact imports of chemicals from trading 
partners and result in retaliation by trading partners against U.S. 
exports of chemicals, further closing markets to U.S. chemical 
manufacturers and weakening their global competitiveness.

ACC remains concerned about overreliance on tariffs to address unfair 
trade barriers or other policy issues. Without an effective negotiation 
strategy to eliminate longstanding barriers to trade, overreliance on 
tariffs will reinforce a vicious cycle of unilateral U.S. tariff 
actions and trading partners imposing retaliatory tariffs on exports of 
U.S.-made chemicals and plastics. This vicious cycle will continue to 
undermine the competitiveness of the U.S. chemical industry and close 
markets to exports of U.S.-made chemicals and plastics. U.S. trading 
partners do not pay U.S. tariffs; tariffs are taxes on imports that 
Americans pay.

Tariff Relief Is Essential to the U.S. Chemical Industry and America's 
Response to COVID-19

In the days following President Trump's declaration of a national 
emergency on March 13, 2020, the Department of Homeland Security (DHS) 
identified the chemical industry and its employees as an industry 
sector critical to public health, safety, and economic and national 
security. Since that time, the American Chemistry Council (ACC) and its 
members have responded quickly to mitigate the impact of COVID-19 by 
placing an emphasis on safe operations while ramping up the supply of 
essential ingredients and materials that healthcare workers, consumers, 
and essential industries need to protect Americans and stop the spread 
of the virus.

Despite the best efforts of businesses around the country, healthcare 
workers, consumers, and workers in essential industries are in dire 
need of products and equipment that can help save lives. Chemicals and 
plastics specifically have been recognized for their critical role in 
adding value to the production and distribution of life-saving 
products:

      For example, chemistry represents 75 percent of the value of 
cleaning and disinfectant products;
      27 percent of the value of medical equipment, including face 
masks, diagnostic equipment, disposable gowns, shoe booties and hoods; 
and
      25 percent of the value of material inputs used to make medical 
supplies such as test tubes, housings for test kits, goggles, surgical 
gloves, and surgical instruments.

Despite the immense value that chemistry provides to these products, 
U.S. Most Favored Nation (MFN) and additional tariffs on critical 
inputs to manufacturing processes, as well as other supply chain 
disruptions, are limiting their speed of production, availability, and 
use. These high demand products are in shortage in the United States 
and around the world. Minimizing existing barriers to trade in these 
products should be a priority.

To that end, we filed comments with USTR \1\ and the USITC \2\ asking 
for tariff relief for specific, essential products under Chapters 22, 
28, 29, 32, 34, 38, 39, and 84 of the U.S. Harmonized Tariff System 
(HTS), in particular from the additional tariffs on imports from China 
under Section 301 of the Trade Act of 1974. Eliminating additional 
tariffs of 25 percent (for Lists 2 and 3 products) and 7.5 percent (for 
List 4A products) on imports from China of these chemical and plastic 
inputs, especially where there is not sufficient domestic production or 
investment, is one of the quickest, most straight-forward approaches to 
cutting the costs of making high-
demand products in the United States.
---------------------------------------------------------------------------
    \1\ https://www.americanchemistry.com/ACC-Comments-to-USTR-Seeking-
Section-301-Tariff-Exclusions-for-Essential-COVID-19-Fighting-
Products.pdf.
    \2\ https://www.americanchemistry.com/ACC-Comments-to-USITC-on-
Essential-Chemicals-and-Plastics-Needed-to-Combat-COVID-19.pdf.

To help businesses weather this difficult time, the Administration in 
April announced a program to allow the deferral on Most Favored Nation 
(MFN) duty payments. This move was a welcome step to help American 
companies stabilize their finances and preserve cash during the 
unprecedented economic crisis resulting from the COVID-19 outbreak. 
Duty deferral freed up cash for companies to make investments in 
personal protective equipment and cleaning supplies, pay critical 
---------------------------------------------------------------------------
bills, and in some cases avoid default.

However, many companies were not able to avail themselves of the 
intended relief. To truly fulfill its stated goal, we ask for the 
Committees' support in urging the Administration to: (1) extend the 
duty deferral policy to cover imports through at least the summer 
months; (2) apply the policy retroactively; (3) broaden the scope of 
duties that may be deferred; and (4) modify the hardship test to allow 
companies in different circumstances to defer duties.

With tariff relief, our industry can deploy the full power of chemistry 
to help combat the spread of the novel coronavirus, maintain essential 
operations and pay our workers, and continue to serve critical sectors 
of the U.S. economy.

The U.S. Chemical Industry Offers Alternatives for Addressing the 
Impact of the U.S. China Trade Dispute

The COVID-19 pandemic has produced significant disruptions in chemical 
supply chains, including with respect to imports from China that are 
essential to U.S. chemical manufacturing competitiveness. This 
situation expands the challenge that U.S. chemical manufacturers have 
faced for the last two years. Due to the U.S. Section 301 tariffs on 
imports from China and China's retaliatory tariffs, bilateral chemicals 
trade is dropping rapidly, resulting in significant loss of market 
access for U.S. exporters to China and reduced ability to import 
mission-critical chemicals from China. U.S.-China bilateral chemicals 
trade is down 19 percent year-on-year in February and down 24 percent 
year-on-year in March.

We believe the U.S. and China should agree to suspend all the 
additional tariffs on bilateral trade immediately. Until such an 
agreement is possible, ACC urges the Administration to:

      Provide indefinite product exclusions for all chemicals and 
plastics on Lists 1, 2, 3, and 4a (HTS Chapters 28-39)--approximately 
$20 billion in imports. This should align with China's tariff exclusion 
process and encourage China to exclude indefinitely a11 U.S. chemicals 
and plastics exports (approximately $11 billion) from the application 
of its retaliatory tariffs.

      Eliminate Section 301 tariffs for products in Lists 1, 2, 3, and 
4a and are also covered by the Miscellaneous Tariff Bill of 2018 (MTB) 
and the next MTB bill that the Congress legislates. The Congress in 
passing the MTB decided that certain imports, including a wide range of 
chemicals, were essential for U.S. manufacturing competitiveness. The 
Section 301 tariffs across all four lists have obviated the benefits of 
the MTB to U.S. chemical manufacturers relying on those imports to 
manufacture certain chemistries in the United States. Furthermore, it 
is worth considering whether the next iteration of the American 
Manufacturing Competitiveness Act should exclude products under future 
MTBs from the application of Section 301 and Section 232 tariffs.

      Eliminate chemicals tariffs globally, particularly between the 
top chemical producing countries. Achieving this goal will give U.S. 
chemical manufacturers the predictability and certainty they need to 
plan, grow, compete, and succeed in the global marketplace.

      Obtain two binding, enforceable commitments from China in the 
Phase 2 Agreement negotiations:

          First, China should harmonize its WTO tariff 
bindings for chemicals and plastics to U.S. levels under the Chemical 
Tariff Harmonization Agreement (CTHA) at the World Trade Organization 
(WTO).

          Second, China should work together with the U.S. 
to bring other markets (e.g., Brazil, India, Kenya, and the United 
Kingdom) into the CTHA, to broaden the scope of participation in that 
initiative, bind currently unbound tariffs for chemicals and plastics 
(e.g., for India, Kenya, Malaysia, and Nigeria), and lower both the 
bound and applied rates for chemicals and plastics for new 
participants.

Until the U.S. and China tariffs are lifted, we urge the Committees to 
demand that USTR improve the Section 301 product exclusion process and 
percentage of approvals so that it provides meaningful relief. We urge 
the Committees to increase their oversight of the exclusion process and 
insist that USTR administer the process in a fair, transparent, and 
efficient manner to ensure that it provides meaningful relief for those 
bearing the brunt of these harmful tariffs.

Avoidance of New U.S. Tariffs and Retaliation Is Paramount to the U.S. 
Chemical Industry

In recent months, the Administration has initiated new Section 232 
investigations on whether imports of electrical transformers, mobile 
cranes, and vanadium threaten to impair the national security. If the 
Administration determines that imports of the above products threaten 
to impair the national security, it could choose to apply tariffs to 
adjust imports and address possible national security threats. ACC 
recently filed comments \3\ with the U.S. Department of Commerce 
regarding possible Section 232 tariffs on electrical transformers, 
arguing that tariffs will increase costs for U.S. chemical 
manufacturers with respect to plant construction, operations, 
maintenance, and further investment expansion. We have similar concerns 
with respect to possible Section 232 tariffs on imports of mobile 
cranes and vanadium.
---------------------------------------------------------------------------
    \3\ https://www.americanchemistry.com/ACC-Comments-for-Section232-
Investigation-on-Imports-of-Transform.pdf.

The Administration also on June 3 initiated a Section 301 investigation 
on whether proposed and in force ``digital services taxes'' (DSTs) on a 
range of countries pose unfair barriers to trade. It may be the case 
that these DSTs are discriminatory, pose unfair barriers to trade, and 
therefore merit enforcement action. If the Administration determines 
that the DSTs are unfair barriers to trade, then it may choose to levy 
additional tariffs as a means of changing the behavior of trading 
partners. ACC filed comments \4\ with USTR regarding France's DST in 
January.
---------------------------------------------------------------------------
    \4\ https://www.americanchemistry.com/Policy/Trade/ACC-Comments-on-
Section-301-Investigation-of-France-Digital-Services-Tax.pdf.

The preference of the U.S. chemical industry would be for the United 
States to come back to the negotiating table at the Organization for 
Economic Cooperation and Development (OECD), continue negotiations with 
trading partners seeking to impose DSTs, and reach a fair solution to 
the international taxation problem at hand, in order to prevent new 
---------------------------------------------------------------------------
DSTs and harmful U.S. unilateral trade actions.

The U.S. chemical industry is concerned that Section 301 tariffs on 
imports of chemicals from the identified U.S. trading partners in the 
DST investigation may increase the costs of chemicals used as inputs in 
chemical manufacturing in the United States, thereby further weakening 
the competitiveness of our industry. Furthermore, given that U.S. 
trading partners retaliated against exports of U.S.-made chemicals in 
response to the U.S. Section 232 tariffs on steel and aluminum and the 
Section 301 tariffs on imports from China, U.S. trading partners will 
likely retaliate against highly competitive U.S. exports, such as 
chemicals and plastics. Retaliation will further limit market access in 
U.S. trading partners such as the European Union (EU) and India.

We also anticipate that if the United States and the EU do not resolve 
their dispute at the World Trade Organization (WTO) regarding 
discriminatory subsidies for large civil aircraft prior to the WTO 
authorizing the EU to impose countermeasure tariffs, the EU could then 
impose high tariffs of up to 100 percent on U.S. exports of chemicals 
and plastics. These tariffs would close a critical market to U.S. 
exports and allow EU and other competitors to eat into the market share 
of U.S. chemical manufacturers in Europe. ACC filed comments \5\ with 
USTR in June regarding the impact of possible EU countermeasure tariffs 
on U.S. exports of chemicals and plastics.
---------------------------------------------------------------------------
    \5\ https://www.americanchemistry.com/ACC-Written-Submission-on-
Enforcement-of-US-WTO-Rights-in-Large.pdf.

The North American Chemical Industry Strongly Supports USMCA 
---------------------------------------------------------------------------
Implementation

The USMCA provides needed certainty for the North American chemical 
industry to further integrate and enhance its competitiveness relative 
to the rest of the world. ACC and our association partners in Canada 
and Mexico joined together in asking for USMCA to retain NAFTA's 
tariff-free environment; streamline and simplify rules of origin for 
chemical substances; and advance regulatory cooperation amongst the 
three parties. USCMA met these objectives and others that the North 
American chemical industry had identified during the negotiations.

ACC and our association partners are proud to support USMCA 
implementation, particularly regarding the innovative regulatory 
cooperation provisions, which we hope the Administration can replicate 
to the greatest extent possible in the new free trade agreements it is 
negotiating. We also welcome the six-month period for companies to 
comply with the rules of origin, which will give U.S. chemical 
manufacturers sufficient time to adjust.

U.S. Chemical Manufacturers Support New Market-Opening Trade Agreements

ACC welcomes the new U.S. free trade agreement negotiations with the 
United Kingdom and Kenya. We urge the Administration to ensure that 
these negotiations yield high standard, comprehensive agreements that 
eliminate tariffs on chemicals immediately upon entry into force and 
establish flexible and transparent rules of origin for chemical 
substances. ACC filed comments with USTR \6\ and the USITC \7\ on the 
Kenya negotiations and recently issued joint comments \8\ with the UK 
Chemical Industries Association on our shared priorities for the U.S.-
UK free trade agreement negotiations.
---------------------------------------------------------------------------
    \6\ https://www.americanchemistry.com/ACC-Public-Comments-on-US-
Kenya-Trade-Negotiations_050620.pdf.
    \7\ https://www.americanchemistry.com/ACC-Public-Comments-on-
Impact-of-Tariff-Elimination-under-a-US-Ken.pdf.
    \8\ https://www.americanchemistry.com/US-UK-Chemical-Industries-
Joint-Comments-on-Bilateral-Trade-Negotiations_200511.pdf.

These negotiations are also significant opportunities to foster greater 
regulatory cooperation between U.S. regulators and their counterparts 
in these markets and promote risk and science based approaches to 
regulation. Innovative regulatory cooperation provisions in trade 
agreements, building on the U.S.-Mexico-Canada Agreement (USMCA) and 
tailored to market conditions, will prevent and address barriers to 
trade and investment while increasing levels of protection for human 
health, safety, and the environment. Furthermore, as a result of these 
negotiations, the Administration should suspend the additional tariffs 
on imports of steel and aluminum that it imposed in 2018 and 2020. 
Suspending these tariffs will provide cost relief for chemical 
manufacturers building innovative new manufacturing facilities in the 
---------------------------------------------------------------------------
United States.

We also urge the Administration to continue its negotiations with 
Brazil, the European Union, India, and Japan, with the view to 
preventing new barriers to trade, addressing existing barriers to 
trade, and negotiating high standard, comprehensive, market-opening 
agreements. Tariff elimination and regulatory cooperation should also 
be important elements of these negotiations. Any limited trade package 
should incorporate ongoing dispute resolution mechanisms so that there 
is a fast-track method to resolve any follow-on trade distorting 
efforts by our trade partners.

U.S. Membership in the World Trade Organization (WTO) Is Essential to 
the Global Competitiveness of the U.S. Chemical Industry

The U.S. chemical industry remains a strong supporter of the WTO and 
U.S. membership in the WTO. We advocate for greater participation in 
WTO initiatives concerning tariff elimination and harmonization. We 
also advocate for strong enforcement of WTO agreements, and in 
particular, the WTO Agreement on Technical Barriers to Trade (TBT). We 
advise against abolition of the WTO and withdrawal by the United States 
from the WTO. We also advise against a reset of U.S. WTO tariff 
bindings, which will only cause widespread uncertainty throughout the 
multilateral trading system and retaliation by U.S. trading partners 
against U.S. exports.

The creation of the WTO in 1995 deeply embedded critical principles 
from the earlier General Agreement on Tariffs and Trade (GATT) into the 
multilateral trading system and expanded the number of governments 
committed to upholding these principles. For the U.S. chemical industry 
, adherence to the principles created the requisite certainty for 
expanding into global markets and establishing the United States as a 
platform for exporting competitively priced, high quality chemicals to 
trading partners around the world.

Tariff elimination and harmonization with key trading partners through 
the WTO and the goods market access schedules of WTO members is 
essential to the global competitiveness of U.S. chemical manufacturers. 
U.S. global leadership will be essential to broad, deep, and durable 
tariff elimination for U.S.-made chemicals, whether at the WTO, through 
plurilateral or regional initiatives, or through free trade agreements 
with key trading partners.

Tariff elimination for chemicals must lead to the lowest possible bound 
rates at the WTO and the avoidance of additional duties on top of 
applied duties. High chemicals tariffs around the world impact the 
ability of U.S. chemical manufacturers to access new markets. They also 
limit opportunities for buyers of chemicals in key economic sectors 
(e.g., building and construction, automotive, agriculture, consumer 
goods, information technology, and civil aviation) from buying 
innovative attractively priced U.S.-made chemicals.

The WTO's World Tariff Profiles 2019 \9\ indicates that a number of 
U.S. trading partners maintain high average bound and most favored 
nation (MFN) applied duties for chemicals (see Table 1 below). WTO 
Members participating in the Chemical Tariff Harmonization Agreement 
(CTHA) have bound their chemical tariffs at relatively low levels, and 
thus have low average applied tariff rates. Those WTO Members who are 
not participating in the CTHA have a large percentage of unbound 
chemical tariffs, meaning that WTO rules do not prevent them from 
raising tariff rates for certain products to prohibitively high levels. 
They also have higher-than average bound and applied tariff rates for 
chemicals. By contrast, the United States average bound rate and 
applied MFN rate for chemicals is 2.8 percent; 100 percent of our 
chemical tariffs are bound.
---------------------------------------------------------------------------
    \9\ https://www.wto.org/english/res_e/booksp_e/
tariff_profiles19_e.pdf.


 Table 1: Average WTO Bound Rates and MFN Applied Rates on Chemicals for
    Certain U.S. Trading Partners Without Free Trade Agreements (CTHA
                         participants in green)
------------------------------------------------------------------------
                                                           Percentage of
                            Average WTO     Average MFN       Unbound
         Country            Bound Rate     Applied Rate      Chemical
                                                              Tariffs
------------------------------------------------------------------------
Argentina                           21.4             8.2               0
------------------------------------------------------------------------
Brazil                              21.1             8.1               0
------------------------------------------------------------------------
China                                6.7             6.7               0
------------------------------------------------------------------------
European Union                       4.5             4.6               0
------------------------------------------------------------------------
India                               39.6            10.1            11.1
------------------------------------------------------------------------
Indonesia                           37.9             5.3               4
------------------------------------------------------------------------
Japan                                2.3             2.1               0
------------------------------------------------------------------------
Malaysia                            11.5             2.5            24.8
------------------------------------------------------------------------
New Zealand                          4.3             0.7               0
------------------------------------------------------------------------
Nigeria                             74.6    Not reported            98.5
------------------------------------------------------------------------
Pakistan                            57.4             7.9             0.1
------------------------------------------------------------------------
Philippines                         19.7             3.6            25.5
------------------------------------------------------------------------
Russian Federation                   5.2             4.6               0
------------------------------------------------------------------------
Saudi Arabia                         5.4             4.9               0
------------------------------------------------------------------------
South Africa                        12.4             2.1             0.4
------------------------------------------------------------------------
Switzerland                          1.0             0.9               0
------------------------------------------------------------------------
Chinese Taipei                       2.8             2.9               0
------------------------------------------------------------------------
Thailand                            29.9             2.6            38.8
------------------------------------------------------------------------


Rather than seeing the above asymmetries as examples of unfairness, we 
urge the Administration to view them as opportunities to provide more 
market access to U.S. exporters in key markets that will drive global 
economic growth in the future.

ACC encourages the Administration to recommit to efforts to reform the 
WTO, especially to ensure that the organization can re-engage on 
driving common approaches to emerging trade issues. A functioning WTO 
has the potential to advance market access and commercial opportunities 
for the chemical industry across a range of issues from regulatory 
cooperation to digital trade policy to environmental market access for 
innovative solutions and products.

Conclusion

Thank you again for the opportunity to provide this statement for the 
record. We look forward to working with the House Ways and Means and 
Senate Finance Committees as they work with the Administration to 
advance and shape the U.S. Trade Policy Agenda. The American Chemistry 
Council would be pleased to provide more information to Committee staff 
as necessary.

                                 ______
                                 
                    American Farm Bureau Federation

                   600 Maryland Ave., SW, Suite 1000W

                          Washington, DC 20024

                            p. 202-406-3600

                            f. 202-406-3806

                          https://www.fb.org/

The American Farm Bureau Federation submits this statement to the 
Senate Committee on Finance for the June 17, 2020, hearing on the 2020 
Trade Policy Agenda. With the ongoing challenges facing American 
farmers and ranchers this year, an active trade agenda that seeks to 
expand market opportunities is critically important. Increasing exports 
with existing trading partners and working to develop new opportunities 
are necessary efforts to help revive the agricultural economy and to 
have agricultural trade be a leading component of broader economic 
recovery this year and beyond.

U.S.-China Phase 1 Agreement

Fulfilling the commitments to purchase U.S. agricultural products by 
China will be a critical component of a trade-oriented economic 
recovery for farmers and ranchers.

Buying by China that had been slowed due to the coronavirus outbreak is 
resuming as Chinese ports have reopened and the Chinese economy 
recovers. Recent purchases of U.S. products include com, soybeans, 
sorghum, wheat and pork. The U.S. and China signed the U.S.-China Phase 
1 Trade Agreement January 15, 2020. It became effective February 14, 
2020. Under this pact, China has agreed to purchase more U.S. 
agricultural products, up to $40 billion annually and $80 billion in 
total over the next 2 years. According to the agreement, these 
purchases by China will be on a commercial basis at market prices, and 
purchases may reflect seasonal marketing patterns. During the first 
quarter of 2020 the U.S. exported $3.1 billion of agricultural products 
to China.

China has been meeting its commitments on standards improvement for 
various products, including beef, pork, poultry and dairy products, in 
the Phase 1 agreement. China continues the process of granting tariff 
waivers upon application by Chinese importers on many U.S. imports, 
including agricultural products.

The agriculture-related parts of the U.S.-China Phase 1 Agreement hold 
promise for U.S. agricultural export growth and for improved economics 
for U.S. farmers and ranchers. The expanded sales to China in the 
agreement will have a direct impact on the domestic production, 
processing, and transportation of agricultural goods. The product-
specific obligations and regulatory commitments in the agreement will 
provide new opportunities for growth in many agricultural export 
categories.

The purchase commitments cover the calendar years for 2020 and 2021. 
Annex 6.1 of the agreement identifies those products that are included 
in the commitment.
Setting the Stage
In calendar year 2019, U.S. agricultural exports to China (including 
distilled spirits, fish products and ethanol which are included in the 
agriculture product category in this agreement) totaled $14.7 billion, 
compared to $10.3 billion during the same period in 2018. The year-to-
date export value in 2019 is significantly higher than the previous 
year because of increased purchases that began in June. U.S. ag exports 
to China in 2019 increased more than $4.6 billion, or 43%, from the 
previous year. However, despite this increase, calendar year 2019 U.S. 
agricultural exports were still well below calendar year 2017 exports 
of $20.8 billion. It is important to keep calendar year 2017 in mind 
due to its serving as the baseline for the Phase 1 agreement. In 
January-April 2020, U.S. agricultural exports to China have topped $4.2 
billion. This is an increase of 15% over the same period in 2019, but 
still well behind the $6.6 billion in agricultural exports achieved 
during January-April 2017.
There's More Than One Way to Peel an Orange
According to U.S. Trade Representative fact sheets, ``China has agreed 
to purchase and import on average at least $40 billion annually of U.S. 
food, agricultural, and seafood products, for a total of at least $80 
billion over the next 2 years.'' Further, in Chapter 6 of the 
agreement, some guardrails around the $40 billion average are added: 
``For the category of agricultural goods identified in Annex 6.1, no 
less than $12.5 billion above the corresponding 2017 baseline amount is 
purchased and imported into China from the United States in calendar 
year 2020, and no less than $19.5 billion above the corresponding 2017 
baseline amount is purchased and imported into China from the United 
States in calendar year 2021.'' Finally, the fact sheet adds, ``on top 
of that, China will strive to import an additional $5 billion per year 
over the next 2 years.''

There are several key elements in USTR's statement. One is the 
reference to U.S. agricultural imports of ``on average at least $40 
billion.'' This element is important because it does not commit China 
to import $40 billion each year, but rather gives China flexibility for 
different levels of imports in 2020 and 2021; these could be 
significantly different. After all, $1 billion and $79 billion and $40 
billion and $40 billion both average to $40 billion. The key to 
understanding the Chapter 6 component is knowing that U.S. agricultural 
exports to China in 2017 were $20.8 billion. If U.S. agricultural 
exports in 2020 increase by the $12.5 billion minimum, that would mean 
that U.S. agricultural exports to China in 2020 will be at least $33.3 
billion. If U.S. agricultural exports in 2021 increase by the $19.5 
billion minimum, that would mean that U.S. agricultural exports to 
China in 2021 will be at least $40.3 billion. If China only imports the 
minimum amount in 2020 and 2021, the total value of imports over the 2-
year period will be $73.6 billion. This is where the final element of 
China striving to reach an additional $5 billion per year comes into 
effect. If this is achieved, the total value of imports over the 2-year 
period would reach $83.6 billion. Certainly, exports closer to $40 
billion each year would seem relatively easier to achieve, but as we 
watch agricultural exports to China over the next 2 years, we should 
keep in mind that China has a lot of flexibility in how it achieves the 
$80 billion commitment.
Full Market Basket
The agreement between the U.S. and China echoes the purchase value 
levels discussed in the press for several months. Over this time, there 
has been considerable discussion about whether $40 billion-$50 billion 
in U.S. agricultural exports to China are feasible. Doubt has crept in 
for a variety of reasons. One primary concern is the retaliatory 
tariffs China is still applying on nearly 100% of U.S. ag exports. 
Though the Phase 1 agreement does not address the tariffs, China's 
decision to offer importers exemptions to additional retaliatory 
tariffs on nearly 700 types of goods from the United States, including 
farm and energy products for 1 year as it battles the coronavirus 
outbreak, should help make U.S. products more price-competitive. The 
second reason is that the U.S. has never come close to exporting $40 
billion in ag products to China. The closest we have ever gotten was 
around $27 billion in 2012.

USTR's fact sheet sheds some light on how $40 billion could be 
achieved. The fact sheet states that ``products will cover the full 
range of U.S. food, agricultural, and seafood products.'' As mentioned 
previously, ``food, agricultural and seafood products'' is a more 
comprehensive definition of agriculture than is often used. When 
agriculture-related products, like distilled spirits, ethanol, and fish 
products, are included it is easier to reach the export goal, but $27 
billion is still a long way from $40 billion.

In order to properly consider whether $40 billion is achievable, it's 
important to understand how the U.S. fits in China's overall 
agricultural import landscape. (For the purposes of discussing overall 
agricultural imports, the more traditional definition of agriculture, 
which does not include distilled spirits, ethanol and seafood, is 
used.) From that perspective, the U.S. is a top-five supplier of 
agricultural imports to China but has not been the top exporter since 
2016. Figure 1 highlights that the top role has belonged to Brazil 
since 2017 and that competition for Chinese consumer dollars is fierce. 
In 2018, Brazil, the EU-28, the United States, Australia, Canada, New 
Zealand, Argentina, Indonesia, Thailand and Vietnam accounted for 82% 
of China's lucrative $124 billion agricultural import market. The rest 
of the world split the remaining 18%. (Full 2019 Chinese import data 
was unavailable at the time of testimony; therefore, 2018 is used 
instead.)

[GRAPHIC] [TIFF OMITTED] T1720.001


Breaking down China's 2018 imports by product category in Figure 2 
provides additional insight. Soybeans and soybean products totaled 
$38.5 billion in 2018 and accounted for 31% of total agricultural 
imports. By value, dairy products were the 
second-largest import category, with imports totaling nearly $10.8 
billion and representing about 9% of total agricultural imports. The 
third-most valuable import category belonged to fruit, which includes 
fresh and processed fruits as well as fruit juice. China imported $8.3 
billion in fruit in 2018, accounting for 7% of total ag imports. Global 
imports of cattle, beef and bovine products were nearly $6.5 billion 
and accounted for 5% of China's total ag imports in 2018. Rounding out 
the top five, prepared foods and miscellaneous beverages (which does 
not include alcoholic or fruit-based beverages) at $5.3 billion 
accounted for 4% of China's total ag imports in 2018. Figure 2 provides 
global import values for 15 different import categories, plus an 
``other'' category that includes all products not otherwise specified. 
(The HS6 codes which are included in each product category are defined 
by USDA Foreign Agricultural Service, following the World Trade 
Organization Agricultural Total specification available via the General 
Agreement on Trade in Services database.)

[GRAPHIC] [TIFF OMITTED] T1720.002


The USTR fact sheet points out that ``China and the United States 
recognize that purchases are to be made at market prices based on 
commercial considerations.'' Between this language and the high-level 
view of China's imports, it seems clear that the U.S. is going to have 
to work to reach $40 billion in agricultural exports. In order to 
achieve this level of agricultural exports, the U.S. will have to win 
market share away from other competitors and the product mix may be 
different from what the U.S. has exported in the past. Market share 
will be won on a product-by product basis, with different competitors 
for each product.

For example, dairy products are China's second -largest agricultural 
import product by value. In 2018, China imported over $10.8 billion in 
dairy products, but only 5% of that total came from the United States. 
Meanwhile, the EU, New Zealand and Australia supplied 48%, 38% and 6%, 
respectively. In China's third largest agricultural import category 
also--fruits, fresh and processed, including juices--the U.S. has a 5% 
market share, but the top competitors are significantly different. 
China imported $8.3 billion in fruit products in 2018, with 24%, 21%, 
9% and 9% of that market supplied by Thailand, Chile, the Philippines 
and Vietnam, respectively. Clearly, Chinese ag imports and the top 
suppliers are significantly different by product category. However, as 
we all know, things can change quickly. And because China is such a 
large market those changes can significantly alter export 
opportunities, which presents dramatic opportunity for U.S. 
agricultural exporters.
Commitments
For agriculture, China has committed to eliminate market access 
barriers, shorten the time for products to get to market, increase 
transparency and encourage the use of international standards.

In biotechnology, the approval process will be more transparent, 
predictable, efficient and science based. The approval process will 
take no more than 24 months, and China's evaluations will be based on 
international standards.

The agreement streamlines and establishes time frames for regulatory 
actions by China for meat, poultry, seafood, dairy, infant formula, 
rice, potatoes, nectarines, blueberries, avocados, barley, alfalfa 
pellets, hay, feed additives, distillers' dry grains (DDGs) and pet 
food.

For poultry, the countries will sign a poultry disease protocol to 
reduce uncertainty in the case of future outbreaks and follow 
international standards. China and the U.S. have begun to open their 
markets to bilateral trade in poultry products. For beef, China will 
eliminate cattle age requirements, recognize the U.S. beef traceability 
system and recognize international standards for cattle production. 
Facility registrations will be streamlined so that imports from U.S.-
inspected and approved facilities with the proper certificates will be 
allowed. China also has committed to implement food safety measures 
that are science-based and risk-based.

Following the 2019 U.S. win in a WTO case brought against China's 
administration of tariff-rate quotas (TRQs), China will improve corn, 
wheat and rice TRQ allocation methodology and will not inhibit the 
filling of TRQs. For fruits, vegetables and plant-based feed products, 
China will finalize phytosanitary protocols for potatoes, nectarines, 
blueberries, avocados, barley, alfalfa hay pellets and cubes, almond 
meal pellets and cubes, and timothy hay.

The U.S. will have to fight for market share in order to achieve this 
export goal and the product mix may be different from what the U.S. has 
exported in the past.

U.S.-Mexico-Canada Agreement

All three countries have now ratified the agreement and completed 
further notification processes. The agreement will come into force July 
1, 2020. It is expected that the agreement will add $2.2 billion 
annually to the existing $40 billion of U.S. agricultural exports to 
Mexico and Canada. The continuation of tariff-free trade with Mexico 
and expanded access to dairy markets in Canada are prominent features 
of the USMCA for agriculture.

Improvements to the approval process for biotechnology products and the 
registration of crop protection products by Mexico are of continued 
interest for U.S. agriculture.

U.S.-Japan Agreement

The U.S.-Japan Trade Agreement went into effect January 1, 2020. The 
agreement was signed October 7, 2019. Once the agreement is 
implemented, the U.S. will have the same level of tariffs into Japan as 
the CPTPP countries and the EU. U.S. beef had a 38.5% import tariff 
while countries such as Australia, Canada and the EU nations are paying 
a 26% tariff into Japan. Already, the impact of the tariff reduction is 
evident in U.S. beef exports. In January-April 2020, U.S. beef exports 
to Japan reached nearly $720 million. This is an increase of $82.6 
million or nearly 13% over the same period in 2019. The tariffs applied 
to U.S. products are now the same as those of the other countries with 
a trade agreement with Japan. Tariffs are being reduced or eliminated 
on a variety of US agricultural exports to Japan.

Four months after the agreement goes into effect (May 2020) the U.S. 
and Japan may begin talks on the remaining issues, such as Sanitary and 
Phytosanitary Standards rules, that would lead to a comprehensive FTA 
between the U.S. and Japan. Rice and most dairy products were not 
covered in the Phase 1 agreement. The U.S. exported $11.7 billion in 
agricultural products to Japan in 2019.

U.S.-European Union (EU) Negotiations

The U.S. and the EU have differences as to what is to be included in 
any future trade agreement. The EU wants a narrowly focused discussion 
without agriculture. Agriculture must be included in any agreement 
given the long-standing issues regarding tariffs, biotechnology, 
geographic indications and barriers by the EU to trade in beef, pork 
and poultry products.

U.S.-UK Negotiations

The United Kingdom left the political structure of the EU on January 
31, 2020. A trade agreement between the UK and the EU will be 
negotiated throughout 2020 and may be completed by December 31, 2020.

After the UK completes its trade agreement with the EU, it can enter 
into trade agreements with other countries.

The UK on March 2, 2020, released its negotiating objectives. The U.S. 
released its trade negotiating objectives with the UK in February 2019. 
The first round of comprehensive negotiations ran May 5th-15th, 
virtually. The next round is scheduled to begin June 15th.

The U.S. exported $1.6 billion in agricultural goods to the UK in 
calendar year 2019. U.S. agriculture believes that there can be growth 
in our exports annually to the UK when the old restrictions that the UK 
had to impose as a member of the EU are lifted. Eliminating and 
lowering tariffs, removing protectionist barriers on beef, pork and 
poultry products, addressing biotechnology approvals and removing 
geographic indications restrictions for dairy and meat products will 
allow increased trade and greater consumer choice in the UK.

U.S.-Kenya Negotiations

The upcoming talks with the Republic of Kenya offer the opportunity to 
address a nation with growth potential for U.S. agricultural exports. 
The ambitious effort also holds potential for future discussions with 
other nations in the region. Eliminating and lowering tariffs, 
improving science-based sanitary standards, addressing the products of 
biotechnology and recognizing the common names for food products, not 
restrictive geographic indications, will allow for continued growth of 
agricultural trade. The U.S. exported $52.8 million in agricultural 
products to Kenya in calendar year 2019. U.S. agricultural exports to 
Kenya peaked at $153.7 million in calendar year 2009.

Perishable Products

The Office of the U.S. Trade Representative had scheduled field 
hearings in Florida and Georgia earlier this year to gather information 
from growers about the impacts of seasonal imports on their operations. 
This issue continues and we strongly support the rescheduling of these 
hearings as soon as conditions permit.

Conclusion

Efforts must continue to expand U.S. agricultural exports around the 
world. Growing market opportunities are necessary for the economic 
future of U.S. farmers and ranchers.

                                 ______
                                 
                    Americans for Free Trade et al.
July 1, 2020

The Honorable Chuck Grassley        The Honorable Ron Wyden
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
Washington, DC 20510                Washington, DC 20510

RE: The President's 2020 Trade Policy Agenda Hearing Record, June 17, 
2020

Dear Chairman Grassley and Ranking Member Wyden:

The Americans for Free Trade coalition, a broad alliance of American 
businesses, trade organizations and workers united against tariffs, 
respectfully submits this written statement to include in the public 
record of the Finance Committee hearing on the 2020 Trade Policy 
Agenda, which took place on June 17, 2020. We appreciate the Committee 
holding this hearing on this important matter.

Our coalition represents every part of the U.S. economy including 
manufacturers, farmers and agribusinesses, retailers, technology 
companies, service suppliers, natural gas and oil companies, importers, 
exporters, and other supply chain stakeholders. Collectively, we 
support tens of millions of American jobs through our vast supply 
chains.

We agree that our trading partners must abide by global trade rules so 
that American businesses can compete on a level playing field, but we 
also believe that the tools used to hold trading partners accountable 
should be strategic, targeted, and serve the best interests of the 
American people and economy. Accordingly, we support the 
Administration's efforts to address China's unfair trading practices, 
including intellectual property violations, forced technology transfer, 
market-distorting subsidies, and more. We also appreciate the progress 
made by the ``Phase One'' agreement with China and lifting a small 
number of tariffs on Chinese imports. Nevertheless, we disagree with 
the continued and indiscriminate use of tariffs to achieve those goals 
and believe that such tariffs cause unnecessary harm to American 
businesses and consumers while creating little leverage to achieve 
further concessions. The Administration has committed to keeping the 
tariffs in place until a ``Phase Two'' deal with China is reached--a 
deal that seems less likely with each passing day. Meanwhile, China has 
lowered its tariffs for competing products from other trading partners 
to an average of 6.7 percent, which allows them to eat into U.S. shares 
of China's market.\1\ The Section 301 tariffs have sown uncertainty in 
the world' s economy and mistrust with trading partners and have 
hindered, not helped, the U.S. response to the COVID-19 outbreak. The 
American economy deserves a better approach.
---------------------------------------------------------------------------
    \1\ Peterson Institute for International Economics (June 2019), 
available at https://www.piie.com/blogs/trade-and-investment-policy-
watch/trump-has-gotten-china-lower-its-tariffs-just-toward#content.

More specifically, tariffs remain in place on nearly $370 billion in 
goods, and it is American businesses, manufacturers, farmers and 
ranchers, and consumers who pay these taxes--not the Chinese. While the 
suspension of the List 4B tariffs and reduction in the List 4A tariffs 
were welcome steps, they fall well short of alleviating the burden that 
the tariffs place on Americans. In fact, Americans paid $72 billion in 
duties in fiscal year 2019--a staggering 73 percent increase over 
fiscal year 2018.\2\ $50 billion of this increase is the direct result 
of the trade war. For U.S. companies importing components or finished 
products subject to the tariffs, these figures mean higher prices, job 
losses and reduced investment. Before the COVID-19 outbreak, the 
Congressional Budget Office estimated that these increased tariffs 
would cost the average American household $1,277 in 2020 \3\--nearly 
eliminating any savings enjoyed as a result of the Tax Cuts and Jobs 
Act.\4\ Just recently, the Federal Reserve Bank of New York released a 
survey finding that ``[t]he U.S. trade war with China cut $1.7 trillion 
from the market value of listed American firms'' and will reduce their 
investment growth rate by almost 2 percentage points by year end.\5\ We 
urge Congress to insist that the Administration lift all punitive China 
tariffs immediately before any further damage is done to the U.S. 
economy.
---------------------------------------------------------------------------
    \2\ CBP Trade and Travel Report, Fiscal Year 2019, p. 1 (January 
2020), available at https://www.cbp.gov/sites/default/files/assets/
documents/2020-Jan/CBP%20FY2019%20Trade%20
and%20Travel%20Report.pdf.
    \3\ ``The Budget and Economic Outlook: 2020 to 2030,'' p. 33, 
Congressional Budget Office, available at https://www.cbo.gov/
publication/56073#::text=.
    \4\ Laura Davison, ``Trump's Tariffs Have Already Wiped Out Tax 
Bill Savings for Average Americans,'' Bloomberg (June 7, 2019), 
available at https://www.bloomberg.com/news/articles/2019-06-07/trump-
s-tariffs-have-wiped-out-most-families-tax-cut-gains.
    \5\ Ben Winck, ``The U.S.-China trade war has erased $1.7 trillion 
from U.S. companies' market value, Fed report says,'' Business Insider, 
available at https://markets.businessinsider.com/news/stocks/trade-war-
cut-trillion-stocks-market-value-us-federal-reserve-2020-5-1029253690 
(June 24, 2020).

Until those tariffs are lifted, we urge the Committee to demand that 
USTR improve the Section 301 product exclusion process and percentage 
of approvals so that it provides meaningful relief. Ambassador 
Lighthizer's remark during the Ways and Means hearing that he 
``hope[s]'' that the exclusion process is ``not too lengthy or too 
difficult'' was stunning. As constituents from around the country have 
noted in prior hearings, letters, and comments, the exclusion process 
remains opaque, burdensome, and difficult. In fact, there have been 
numerous reports \6\ regarding the inconsistencies with which the 
exclusion process has been administered, the opaqueness with which USTR 
makes decisions on exclusion petitions, and the overall sluggishness of 
the process. We urge the Committee to increase its oversight of the 
exclusion process and insist that USTR administer the process in a 
fair, transparent, and efficient manner to ensure that it provides 
meaningful relief for those bearing the brunt of these harmful tariffs.
---------------------------------------------------------------------------
    \6\ See, e.g., Leticia Mjranda, ``Amid opaque tariff process, 
questions arise as to why some companies receive exemptions,'' NBC News 
(February 13, 2020), available at https://www.
nbcnews.com/business/business-news/amid-opague-tariff-process-
guestions-arise-why-some-companies-receive-n1119071.

We applaud the Committee's request for the United States International 
Trade Commission study seeking to identify these key products. As a 
follow-up to the release of that study, we ask for the Committee's 
support in urging the Administration to immediately grant product 
exclusions and eliminate Most Favored Nation (MFN) tariffs for all 
products--including inputs-needed to respond to the COVID-19 outbreak. 
While USTR opened a new comment period for this purpose, the process 
suffers from the same shortcomings as all previous product exclusion 
comment periods. In addition, Ambassador Lighthizer shared his view 
during the hearings that he is ``not in favor of reducing tariffs on 
the things we need'' and instead is ``far more in favor of increasing 
tariffs on the things that we need.'' That is opposite of the policy we 
need now and creates little confidence that products needed for the 
COVID-19 response will receive exclusions from USTR. It also fails to 
recognize that ``[t]rade is not the problem; it is part of the 
solution.''\7\ As companies now focus on reopening their businesses and 
ensuring the protection of their workers and consumers, we need to make 
sure we do not increase the costs of these products now for those who 
need them the most.
---------------------------------------------------------------------------
    \7\ Martin Wolf, ``The Dangerous War on Supply Chains,'' Financial 
Times (June 23, 2020), available at https://www.ft.com/content/
e27b0c0c-1893-479b-9ea3-27a81c2506c9?63bac0e6-3d28-36b1-7417-
423982f60790.

Further, we are deeply concerned with Ambassador Lighthizer's testimony 
before the Committee that ``from now on the extensions of the 
exclusions will expire at the end of this calendar year and then we'll 
decide what happens after that.'' Ambassador Lighthizer further stated 
that companies ``have had a year or, in some cases, 2 years to make 
some change in their process so that they don't come under these 
cases.'' These statements demonstrate a fundamental lack of 
understanding regarding the complex business decisions that determine 
where global supply chains are developed and whether they can or should 
be moved. Hundreds of companies testified during the Section 301 
process discussion regarding the difficulty of shifting supply chains, 
especially in a short period of time. In addition, it shows little 
regard for the economic uncertainty faced by American businesses 
because of the COVID-19 outbreak. Rather than create additional 
uncertainty by extending product exclusions for a few months, we ask 
the Committee to insist that USTR grant extensions for at least 12 
---------------------------------------------------------------------------
months.

We also are concerned that the Administration believes that a complete 
decoupling from China is possible or in American interests. We 
appreciate Ambassador Lighthizer's testimony that a complete decoupling 
of the U.S. and Chinese economies is not a ``reasonable policy option 
at this point.'' However, President Trump tweeted just a day later that 
``the U.S. does maintain a policy option, under various conditions, of 
a complete decoupling from China.''\8\ While ``decoupling'' can mean a 
range of things, we caution that a forced decoupling from China--or any 
other country--will harm U.S. companies, American consumers, and the 
U.S. economy. Instead, we urge Congress and the Administration to 
pursue new trade agreements around the globe--including in the Indo-
Pacific region--that open new markets to American businesses, 
manufacturers, farmers and ranchers, and service providers and that 
leads the world in setting the trade rules for the 21st century.
---------------------------------------------------------------------------
    \8\ https://twitter.com/realDonaldTrump/status/1273706102023237633.

As the Committee knows, the COVID-19 pandemic has resulted in a 
historic closure of businesses, diminished revenues, and significant 
financial hardship for American companies and their workers. While the 
U.S. economy has started to reopen, businesses will continue to face 
liquidity challenges for some time. To help those businesses weather 
this financially difficult time, the Administration announced a program 
to allow the deferral on Most Favored Nation (MFN) duty payments. This 
move was a welcome step to help American companies stabilize their 
finances and preserve cash during the unprecedented economic crisis 
resulting from the COVID-19 outbreak. Duty deferral freed up cash for 
companies to make investments in personal protective equipment and 
cleaning supplies, pay critical bills, and in some cases avoid default; 
however, many companies were not able to avail themselves of the 
intended relief. To truly fulfill its stated goal, we ask for the 
Committee's support in urging the Administration to: (1) extend the 
duty deferral policy to cover imports through at least the summer 
months; (2) apply the policy retroactively; (3) broaden the scope of 
duties that may be deferred; and (4) modify the hardship test to allow 
---------------------------------------------------------------------------
companies in different circumstances to defer duties.

Finally, we have attached two documents for your reference: (1) AFT's 
Tariff Misery Index, which demonstrates the economic impact that the 
Section 301 tariffs are having on the U.S. economy; and (2) a list of 
recent studies on the economic impact of the tariffs.

As was noted by the Father of Economics, Adam Smith: ``There is no art 
which one government sooner learns of another than that of draining 
money from the pockets of the people.''\9\ But that is just what this 
Administration has done with these tariffs. Americans have paid more 
than $60 billion in tariffs because of the trade war, and these taxes 
continue to threaten the survival of American businesses already 
struggling to keep their doors open amid the economic crisis. The time 
is now for Ambassador Lighthizer and the Trump Administration to end 
the tariffs. We thank the Committee for holding this hearing and for 
the opportunity provide this statement for the record.
---------------------------------------------------------------------------
    \9\ Adam Smith, The Wealth of Nations, Book IV, Chapter II, p. 456, 
,r 10 (1776).

---------------------------------------------------------------------------
Sincerely,

Accessories Council                 Beer Institute
ACT | The App Association           Business & Institutional Furniture 
                                    Manufacturers Association (BIFMA)
Agriculture Transportation 
Coalition (AgTC)                    California Retailers Association
ALTI--Audio and Loudspeaker 
Technologies International          Carolina Loggers Association
American Apparel & Footwear 
Association (AAFA)                  Chemical Industry Council of 
                                    Delaware (CICD)
American Association of Exporters 
and Importers (AAEI)                Coalition of New England Companies 
                                    for Trade (CONECT)
American Association of Port 
Authorities                         Colorado Retail Council
American Bakers Association         Columbia River Customs Brokers and 
                                    Forwarders Assn.
American Bridal & Prom Industry 
Association (ABPIA)                 Computer & Communications Industry 
                                    Association (CCIA)
American Chemistry Council          Computing Technology Industry 
                                    Association (CompTIA)
American Down and Feather Council   Consumer Technology Association
American Fly Fishing Trade 
Association                         Council of Fashion Designers of 
                                    America (CFDA)
American Home Furnishings Alliance  CropLife America
American Lighting Association       Customs Brokers & Freight 
                                    Forwarders Assn. of Washington 
                                    State
American Petroleum Institute        Customs Brokers & Freight 
                                    Forwarders of Northern California
American Pyrotechnics Association   Distilled Spirits Council of the 
                                    United States
American Rental Association         Electronic Transactions Association
American Specialty Toy Retailing 
Association                         Farmers for Free Trade
Arizona Technology Council          Fashion Accessories Shippers 
                                    Association (FASA)
Arkansas Grocers and Retail 
Merchants Association               Fashion Jewelry & Accessories Trade 
                                    Association
Association For Creative Industries Flexible Packaging Association
Association for PRINT Technologies  Florida Ports Council
Association of American Publishers  Florida Retail Federation
Association of Equipment 
Manufacturers (AEM)                 NAPIM (National Association of 
                                    Printing Ink Manufacturers)
Association of Home Appliance 
Manufacturers                       National Association of Chain Drug 
                                    Stores (NACDS)
Auto Care Association               National Association of Chemical 
                                    Distributors (NACD)
Footwear Distributors and Retailers 
of America (FDRA)                   National Association of Foreign-
                                    Trade Zones (NAFTZ)
Fragrance Creators Association      National Association of Home 
                                    Builders
Game Manufacturers Association      National Association of Music 
                                    Merchants
Gemini Shippers Association         National Association of Printing 
                                    Ink Manufacturers
Georgia Retailers                   National Association of Trailer 
                                    Manufacturers (NATM)
Global Chatnber                    National Confectioners Association
Global Cold Chain Alliance          National Council of Chain 
                                    Restaurants
Greeting Card Association           National Customs Brokers and 
                                    Freight Forwarders Association of 
                                    America
Halloween Industry Association      National Fisheries Institute
Hobby Manufacturers Association     National Foreign Trade Council
Home Fashion Products Association   National Grocers Association
Home Furnishings Association        National Lumber and Building 
                                    Material Dealers Association
Household and Commercial Products 
Association                         National Marine Manufacturers 
                                    Association
Idaho Retailers Association         National Restaurant Association
Illinois Retail Merchants 
Association                         National Retail Federation
Independent Office Products & 
Furniture Dealers Association 
(IOPFDA)                            National Ski & Snowboard Retailers 
                                    Association
Indiana Retail Council              National Sporting Goods Association
Information Technology Industry 
Council (ITI)                       Natural Products Association
International Bottled Water 
Association (IBWA)                  New Jersey Retail Merchants 
                                    Association
International Foodservice 
Distributors Association            North American Association of 
                                    Uniform Manufacturers and 
                                    Distributors (NAUMD)
International Housewares 
Association                         North Carolina Retail Merchants 
                                    Association
International Warehouse and 
Logistics Association               Ohio Council of Retail Merchants
International Wood Products 
Association                         Outdoor Industry Association
ISSA--The Worldwide Cleaning 
Industry Association                Pacific Coast Council of Customs 
                                    Brokers and Freight Forwarders 
                                    Assns. Inc.
Jeweler's Vigilance Committee       Pennsylvania Retailers' Association
Juice Products Association (JPA)    PeopleforBikes
Juvenile Products Manufacturers 
Association                         Personal Care Products Council
Licensing Industry Merchandisers' 
Association                         Pet Industry Joint Advisory Council
Los Angeles Customs Brokers and 
Freight Forwarders Assn.            Petroleum Equipment & Services 
                                    Association
Louisiana Retailers Association     Plumbing Manufacturers 
                                    International
Maine Grocers & Food Producers 
Association                         Power Tool Institute (PTI)
Maine Lobster Dealers' Association  Promotional Products Association 
                                    International
Maritime Exchange for the Delaware 
River and Bay                       Recreational Off-Highway Vehicle 
                                    Association
Maryland Retailers Association      Retail Association of Maine
Methanol Institute                  Retail Council of New York State
Michigan Chemistry Council          Retail Industry Leaders Association
Michigan Retailers Association      Retailers Association of 
                                    Massachusetts
Minnesota Retailers Association     RISE (Responsible Industry for a 
                                    Sound Environment)
Missouri Retailers Association      RV Industry Association
Motor & Equipment Manufacturers 
Association                         The Fertilizer Institute
Motorcycle Industry Council         The Hardwood Federation
San Diego Customs Brokers and 
Forwarders Assn.                    The Toy Association
SEMI                                Travel Goods Association
Snowsports Industries America       Truck & Engine Manufacturers 
                                    Association (EMA)
Software & Information Industry 
Association (SHA)                   U.S. Hide, Skin and Leather 
                                    Association
South Dakota Retailers Association  United States Council for 
                                    International Business
Specialty Equipment Market 
Association                         United States Fashion Industry 
                                    Association
Specialty Vehicle Institute of 
America                             US Global Value Chain Coalition
Sports & Fitness Industry 
Association                         US-China Business Council
TechNet                             Virginia Retail Merchants 
                                    Association
Telecommunications Industry 
Association (TIA)                   Virginia-DC District Export Council 
                                    (VA-DC DEC)
Texas Retailers Association         Washington Retail Association
Texas Water Infrastructure Network  Window and Door Manufacturers 
                                    Association
The Airforwarders Association       World Pet Association, Inc. (WPA)

                                    [GRAPHIC] [TIFF OMITTED] T1720.003
                                    

              Recent Studies on Economic Impact of Tariffs

 1.  June 2020, Peterson Institute for International Economics: US-
China phase one tracker: China's purchases of US goods; Chad Bown, 
https://www.piie.com/research/piie-charts/us-china-phase-one-tracker-
chinas-purchases-us-goods.
 2.  May 2020, National Bureau of Economic Research: The Effect of the 
U.S.-China Trade War on U.S. Investment; Mary Amiti, Sang Hoon Kong, 
and David Weinstein, https://www.nber.org/papers/w27114.
 3.  January 2020, National Bureau of Economic Research: Who's Paying 
for the US Tariffs? A Longer-Term Perspective; Mary Amiti, Stephen J. 
Redding, and David E. Weinstein, https://www.nber.org/papers/w26610.
 4.  January 2020, National Bureau of Economic Research: Rising Import 
Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-
Style Protectionism; Kyle Handley, Fariha Kamal, and Ryan Monarch, 
https://www.
nber.org/papers/w26611.
 5.  January 2020, Congressional Budget Office: The Budget and Economic 
Outlook 2020 to 2030, https://www.cbo.gov/publication/56020.
 6.  December 2019, Federal Reserve Board: Disentangling the Effects of 
the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing 
Sector; Aaron Flaaen and Justin Pierce, https://www.federalreserve.gov/
econres/feds/files/2019086pap.pdf?.
 7.  October 2019, Revised December 2019, National Bureau of Economic 
Research: The Consumption Response to Trade Shocks: Evidence from the 
US-China Trade War; Michael E. Waugh, https://www.nber.org/system/
files/working--papers/w26353/w26353.pdf.
 8.  October 2019, National Bureau of Economic Research: Tariff 
Passthrough at the Border and at the Store: Evidence from US Trade 
Policy; Alberto Cavallo, Gita Gopinath, Brent Neiman, and Jenny Tang, 
https://www.nber.org/papers/w26396.
 9.  June 2019, Peterson Institute for International Economics: Trump 
Has Gotten China to Lower Its Tariffs. Just Toward Everyone Else.; Chad 
P. Bown, Euijin Jung, and Eva (Yiwen) Zhang, https://www.piie.com/
blogs/trade-and-investment-policy-watch/trump-has-gotten-china-lower-
its-tariffs-just-toward.
10.  March 2019, Revised October 2019, National Bureau of Economic 
Research: The Return to Protectionism; Pablo D. Fajgelbaum, Pinelopi K. 
Goldberg, Patrick J. Kennedy, and Amit K. Khandelwal, https://
www.nber.org/system/files/working--papers/w25638/w25638.pdf.
11.  March 2019, National Bureau of Economic Research: The Impact of 
the 2018 Trade War on U.S. Prices and Welfare; Mary Amiti, Stephen J. 
Redding, and David E. Weinstein, https://www.nber.org/papers/w25672.
12.  February 2019, The Trade Partnership, LLC: Estimated Impacts of 
Tariffs on the U.S. Economy and Workers, Laura Baughman, https://
www.wita.org/wp-content/uploads/2019/06/Estimated-Impact-Tarriffs.pdf.
13.  December 2018, National Bureau of Economic Research: Macroeconomic 
Consequences of Tariffs; Davide Furceri, Swamali A. Hannan, Jonathan D. 
Ostry, and Andrew K. Rose, https://www.nber.org/system/files/working--
papers/w25402/w25402.pdf.

                                 ______
                                 
                        Center for Fiscal Equity

                      14448 Parkvale Road, Suite 6

                          Rockville, MD 20853

                      [email protected]

                    Statement of Michael G. Bindner

Chairman Grassley and the Ranking Member Wyden, thank you for the 
opportunity to submit these comments for the record to the Committee on 
Finance. Please see our comments from last year, which are attached 
with USMCA provisions removed.

The comments on the incompetence of this President are more obvious 
this year, when trade was put in front of a pandemic, leading to 
domestic disaster. He then reversed his comments and is inciting more 
retaliation from this authoritarian opposite in China. Sadly, in the 
impeachment trial earlier this year, the House did not cite this 
incompetence nor did the Senate consider it, so here we are again. 
More's the pity.

Thank you for the opportunity to address the committee. We are, of 
course, available for direct testimony or to answer questions by 
members and staff.

Attachment One--The President's 2019 Trade Policy Agenda

Trade negotiations with China, Japan, the EU, and the UK threatening 
tariffs have taken on the character of economic gunboat diplomacy, but 
without the Navy. These occur because the President is ill equipped by 
his background as a businessman to work cooperatively, which is the 
essence of governance in a free society. He has a freer hand in trade 
negotiations. Sadly, his experience as a CEO has not served the nation 
well. The modus operandi of most executives is to break things in order 
to be seen fixing them. This must stop. The public is not amused, 
including the Chamber of Commerce, farmers and the stock and commodity 
markets.

The solution to these problems lies not with oversight of trade policy 
but through using criminal contempt proceedings against the leadership 
if the Internal Revenue Service, the Secretary of the Treasury and 
anyone in the White House, possibly, if not probably, including the 
President for not releasing the tax information requested by the 
Chairman. The penalties for refusing to do so are quite clear and the 
opinion that a sitting President cannot be indicted can no way apply to 
this matter.

Today's witness is not likely to say his boss is a vainglorious idiot, 
so allow me to. It is well known that in this Administration, 
professional diplomatic expertise is not valued. Mr. Trump prefers to 
shoot from the lip. The incompetence of this president is tragic for 
our ongoing trade policy, which relies on a high degree of 
professionalism and careful work over a period of several 
administrations. NAFTA negotiations and its successor, as well as 
similar free trade agreements are an example of this. The Trans-Pacific 
Partnership was one such effort, but it was derailed by presidential 
politics on both sides. In trade, what is good politics is often not 
good economic policy.

The interaction of tax and trade is worthy of mention. Attachment Two 
contains our revised tax reform proposals. Two elements of these 
proposals are discussed below.

Consumption taxes could have a big impact on workers, industry and 
consumers. Enacting an I-VAT is far superior to a tariff. The more 
government costs are loaded onto an I-VAT the better. Indeed, if the 
employer portion of Old-Age and Survivor's Insurance, as well as all of 
disability and hospital insurance are decoupled from income and 
credited equally and personal retirement accounts are not used, then 
there is no reason not to load them onto an I-VAT. This tax is zero 
rated at export and fully burdens imports. Seen another way, to not put 
as much taxation into VAT as possible is to enact an unconstitutional 
export tax. Adopting an I-VAT is superior to its week sister, the 
Destination Based Cash Flow Tax that was contemplated for inclusion in 
the TCJA. It would have run afoul of WTO rules on taxing corporate 
income. I-VAT, which taxes both labor and profit, does not.

The second tax applicable to trade is a Subtraction VAT or S-VAT. This 
tax is designed to benefit the families of workers through direct 
subsidies, such as an enlarged child tax credit, or indirect subsidies 
used by employers to provide health insurance or tuition reimbursement, 
even including direct medical care and elementary school tuition. As 
such, S-VAT cannot be border adjustable. Doing so would take away 
needed family benefits. As such, it is really part of compensation. 
While we could run all compensation through the public sector.

The S-VAT could have a huge impact on long term trade policy, probably 
much more than trade treaties, if one of the deductions from the tax is 
purchase of employer voting stock (in equal dollar amounts for each 
worker). Over a fairly short period of time, much of American industry, 
if not employee-owned outright (and there are other policies to 
accelerate this, like ESOP conversion) will give workers enough of a 
share to greatly impact wages, management hiring and compensation and 
dealing with overseas subsidiaries and the supply chain--as well as 
impacting certain legal provisions that limit the fiduciary impact of 
management decision to improving short-term profitability (at least 
that is the excuse managers give for not privileging job retention).

Employee-owners will find it in their own interest to give their 
overseas subsidiaries and their supply chain's employees the same deal 
that they get as far as employee-ownership plus an equivalent standard 
of living. The same pay is not necessary, currency markets will adjust 
once worker standards of living rise. Attachment Three further 
discusses employee ownership.

Over time, ownership will change the economies of the nations' we trade 
with, as working in employee-owned companies will become the market 
preference and force other firms to adopt similar policies (in much the 
same way that, even without a tax benefit for purchasing stock, 
employee-owned companies that become more democratic or even more 
socialistic, will force all other employers to adopt similar measures 
to compete for the best workers and professionals).

In the long run, trade will no longer be an issue. Internal company 
dynamics will replace the need for trade agreements as capitalists lose 
the ability to pit the interest of one nation's workers against the 
others. This approach is also the most effective way to deal with the 
advance of robotics. If the workers own the robots, wages are swapped 
for profits with the profits going where they will enhance consumption 
without such devices as a guaranteed income.

Attachment Two--Tax Reform, Center for Fiscal Equity, February 21, 2020

Individual payroll taxes. These are optional taxes for Old-Age and 
Survivors Insurance after age 60 (or 62). We say optional because the 
collection of these taxes occurs if an income sensitive retirement 
income is deemed necessary for program acceptance. Higher incomes for 
most seniors would result if an employer contribution funded by the 
Subtraction VAT described below were credited on an equal dollar basis 
to all workers. If employee taxes are retained, the ceiling should be 
lowered to $75,000 reduce benefits paid to wealthier individuals and a 
floor should be established so that Earned Income Tax Credits are no 
longer needed. Subsidies for single workers should be abandoned in 
favor of radically higher minimum wages.

Wage Surtaxes. Individual income taxes on salaries, which exclude 
business taxes, above an individual standard deduction of $75,000 per 
year, will range from 6% to 36%. This tax will fund net interest on the 
debt (which will no longer be rolled over into new borrowing), 
redemption of the Social Security Trust Fund, strategic, sea and non-
continental U.S. military deployments, veterans' health benefits as the 
result of battlefield injuries, including mental health and addiction 
and eventual debt reduction. Transferring OASDI employer funding from 
existing payroll taxes would increase the rate but would allow it to 
decline over time. So would peace.

Asset Value-Added Tax (A-VAT). A replacement for capital gains taxes, 
dividend taxes, and the estate tax. It will apply to asset sales, 
dividend distributions, exercised options, rental income, inherited and 
gifted assets and the profits from short sales. Tax payments for option 
exercises and inherited assets will be reset, with prior tax payments 
for that asset eliminated so that the seller gets no benefit from them. 
In this perspective, it is the owner's increase in value that is taxed. 
As with any sale of liquid or real assets, sales to a qualified broad-
based Employee Stock Ownership Plan will be tax free. These taxes will 
fund the same spending items as income or S-VAT surtaxes. This tax will 
end Tax Gap issues owed by high income individuals. A 24% rate is 
between the GOP 20% rate and the Democratic 28% rate. It's time to quit 
playing football with tax rates to attract side bets.

Subtraction Value-Added Tax (S-VAT). These are employer paid Net 
Business Receipts Taxes. S-VAT is a vehicle for tax benefits, including

      Health insurance or direct care, including veterans' health care 
for non-
battlefield injuries and long-term care.
      Employer paid educational costs in lieu of taxes are provided as 
either 
employee-directed contributions to the public or private unionized 
school of their choice or direct tuition payments for employee children 
or for workers (including ESL and remedial skills). Wages will be paid 
to students to meet opportunity costs.
      Most importantly, a refundable child tax credit at median income 
levels (with inflation adjustments) distributed with pay.

Subsistence level benefits force the poor into servile labor. Wages and 
benefits must be high enough to provide justice and human dignity. This 
allows the ending of state administered subsidy programs and 
discourages abortions, and as such enactment must be scored as a must 
pass in voting rankings by pro-life organizations (and feminist 
organizations as well). To assure child subsidies are distributed, S-
VAT will not be border adjustable.

The S-VAT is also used for personal accounts in Social Security, 
provided that these accounts are insured through an insurance fund for 
all such accounts, that accounts go toward employee ownership rather 
than for a subsidy for the investment industry. Both employers and 
employees must consent to a shift to these accounts, which will occur 
if corporate democracy in existing ESOPs is given a thorough test. So 
far it has not. S-VAT funded retirement accounts will be equal dollar 
credited for every worker. They also have the advantage of drawing on 
both payroll and profit, making it less regressive.

A multi-tier S-VAT could replace income surtaxes in the same range. 
Some will use corporations to avoid these taxes, but that corporation 
would then pay all invoice and subtraction VAT payments (which would 
distribute tax benefits. Distributions from such corporations will be 
considered salary, not dividends.

Invoice Value-Added Tax (I-VAT). Border adjustable taxes will appear on 
purchase invoices. The rate varies according to what is being financed. 
If Medicare for All does not contain offsets for employers who fund 
their own medical personnel or for personal retirement accounts, both 
of which would otherwise be funded by an S-VAT, then they would be 
funded by the I-VAT to take advantage of border adjustability. I-VAT 
also forces everyone, from the working poor to the beneficiaries of 
inherited wealth, to pay taxes and share in the cost of government. 
Enactment of both the A-VAT and I-VAT ends the need for capital gains 
and inheritance taxes (apart from any initial payout). This tax would 
take care of the low-income Tax Gap.

I-VAT will fund domestic discretionary spending, equal dollar employer 
OASI contributions, and non-nuclear, non-deployed military spending, 
possibly on a regional basis. Regional I-VAT would both require a 
constitutional amendment to change the requirement that all excises be 
national and to discourage unnecessary spending, especially when 
allocated for electoral reasons rather than program needs. The latter 
could also be funded by the asset VAT (decreasing the rate by from 
19.5% to 13%).

As part of enactment, gross wages will be reduced to take into account 
the shift to S-VAT and I VAT, however net income will be increased by 
the same percentage as the I-VAT. Adoption of S VAT and I-VAT will 
replace pass-through and proprietary business and corporate income 
taxes.

Carbon Value-Added Tax (C-VAT). A Carbon tax with receipt visibility, 
which allows comparison shopping based on carbon content, even if it 
means a more expensive item with lower carbon is purchased. C-VAT would 
also replace fuel taxes. It will fund transportation costs, including 
mass transit, and research into alternative fuels (including fusion). 
This tax would not be border adjustable.

Attachment Three--Employee Ownership from Improving Retirement Security 
                    for America's Workers, Center for Fiscal Equity, 
                    June 6, 2018

In the January 2003 issue of Labor and Corporate Governance, we 
proposed that Congress should equalize the employer contribution based 
on average income rather than personal income. It should also increase 
or eliminate the cap on contributions. The higher the income cap is 
raised, the more likely it is that personal retirement accounts are 
necessary. A major strength of Social Security is its income 
redistribution function.

We suspect that much of the support for personal accounts is to subvert 
that function--so any proposal for such accounts must move 
redistribution to account accumulation by equalizing the employer 
contribution.

We propose directing personal account investments to employer voting 
stock, rather than an index funds or any fund managed by outside 
brokers. There are no Index Fund billionaires (except those who operate 
them).

People become rich by owning and controlling their own companies. 
Additionally, keeping funds in-house is the cheapest option 
administratively. I suspect it is even cheaper than the Social Security 
system--which operates at a much lower administrative cost than any 
defined contribution plan in existence.

If employer voting stock is used, the Net Business Receipts Tax/
Subtraction VAT would fund it. If there are no personal accounts, then 
the employer contribution would be VAT funded.

Safety is, of course, a concern with personal accounts. Rather than 
diversifying through investment, however, we propose diversifying 
through insurance. A portion of the employer stock purchased would be 
traded to an insurance fund holding shares from all such employers. 
Additionally, any personal retirement accounts shifted from employee 
payroll taxes or from payroll taxes from non-corporate employers would 
go to this fund.

The insurance fund will save as a safeguard against bad management. If 
a third of shares were held by the insurance fund than dissident 
employees holding 25.1% of the employee-held shares (16.7% of the 
total) could combine with the insurance fund held shares to fire 
management if the insurance fund agreed there was cause to do so. Such 
a fund would make sure no one loses money should their employer fail 
and would serve as a sword of Damocles' to keep management in line. 
This is in contrast to the Cato/PCSSS approach, which would continue 
the trend of management accountable to no one. The other part of my 
proposal that does so is representative voting by occupation on 
corporate boards, with either professional or union personnel providing 
such representation.

The suggestions made here are much less complicated than the current 
mix of proposals to change bend points and make OASI more of a needs 
based program. If the personal account provisions are adopted, there is 
no need to address the question of the retirement age. Workers will 
retire when their dividend income is adequate to meet their retirement 
income needs, with or even without a separate Social Security program.

No other proposal for personal retirement accounts is appropriate. 
Personal accounts should not be used to develop a new income stream for 
investment advisors and stock traders. It should certainly not result 
in more ``trust fund socialism'' with management that is accountable to 
no cause but short term gain. Such management often ignores the long-
term interests of American workers and leaves CEOs both over-paid and 
unaccountable to anyone but themselves.

If funding comes through an S-VAT, there need not be any income cap on 
employer contributions, which can be set high enough to fund current 
retirees and the establishing of personal accounts. Again, these 
contributions should be credited to employees regardless of their 
salary level.

Conceivably a firm could reduce their S-VAT liability if they made all 
former workers and retirees whole with the equity they would have 
otherwise received if they had started their careers under a reformed 
system. Using Employee Stock Ownership Programs can further accelerate 
that transition. This would be welcome if ESOPs became more democratic 
than they are currently, with open auction for management and executive 
positions and an expansion of cooperative consumption arrangements to 
meet the needs of the new owners.

The new House Majority should not run away from this proposal to enact 
personal accounts. If the proposals above are used as conditions for 
enactment, we suspect that it won't have to. The investment sector will 
run away from them instead and will mobilize the next version of the 
Tea Party against them. Let us hope that the rise of Democratic 
Socialism in the party invests workers in the possibilities of employee 
ownership.

                                 ______
                                 
                        Coalition for GSP et al.

                      1701 K Street, NW, Suite 575

                          Washington, DC 20006

                          Phone: 202-445-8711

                              July 1, 2020

The Honorable Chuck Grassley        The Honorable Richard Neal
Chairman                            Chairman
U.S. Senate                         U.S. House of Representatives
Committee on Finance                Committee on Ways and Means
Washington, DC 20510                Washington, DC 20515

The Honorable Ron Wyden             The Honorable Kevin Brady
Ranking Member                      Ranking Member
U.S. Senate                         U.S. House of Representatives
Committee on Finance                Committee on Ways and Means
Washington, DC 20510                Washington, DC 20515

Dear Chairmen Grassley and Neal and Ranking Members Wyden and Brady:

As you know, the current Congressional authorization of the Generalized 
System of Preferences (GSP) program expires on December 31, 2020. The 
250 undersigned companies and trade associations are writing to urge 
swift passage of legislation extending that authorization. Many U.S. 
companies are experiencing severe harm from the COVID-19 pandemic and 
the related economic downturn and are struggling to overcome these 
challenges, recover losses, and start growing again. Further 
uncertainty about whether companies will have to pay millions of 
dollars a day in new taxes in January 2021 is the last thing the 
American business community needs.

GSP supports American manufacturing by reducing costs of imported 
inputs, machinery and equipment, and helps American families make ends 
meet by lowering the costs of consumer goods imported duty free. The 
GSP program saved American companies over $1 billion in import duties 
in 2019. Yet temporary lapses in the past have forced companies to lay 
off workers, freeze new hires, cut wages and benefits, and delay 
capital investments while awaiting congressional reauthorization. We 
cannot afford for that to happen again.

Swift reauthorization is not the only thing that could help recover 
from the pandemic-related fallout. Lost GSP benefits for India and 
Turkey cost American companies as much as $375 million in new taxes 
between May 2019 and April 2020. A partial suspension for Thailand in 
April 2020 will add millions of dollars more each month in extra taxes. 
Similarly, American companies paid about $100 million in tariffs in 
2019 on individual products that meet the statutory thresholds for 
reinstated GSP benefits, but all redesignation requests were rejected 
during the current review. Restoring lost GSP eligibility for these 
products would provide significant benefits to American companies and 
workers.

    The GSP program enjoys strong bipartisan support in Congress and a 
track record of creating American jobs. The sooner Congress can extend 
GSP's authorization, and hopefully take other steps to restore critical 
benefits, the better positioned U.S. businesses will be to grow and 
thrive again.

            Sincerely,

            Daniel Anthony
            Executive Director
            E-mail: [email protected]

American Apparel and Footwear 
Association                         Altray Company, Inc. (Stamford, CT)
American Spice Trade Association    Altuni, LLC (South Hackensack, NJ)
Association of Food Industries      Alum Tech Corp. (West Melbourne, 
                                    FL)
California Chamber of Commerce      American Omni Trading Company 
                                    (Katy, TX)
Coalition for GSP                   American Trade Sales, Inc. (New 
                                    York, NY)
Consumer Technology Association     AMJ Gold (Glendora, CA)
International Bottled Water 
Association                         Ammex (Kent, WA)
International Wood Products 
Association                         Andre Prost, Inc. (Old Saybrook, 
                                    CT)
National Association of Chemical 
Distributors                        Ascena Retail Group, Inc. (New 
                                    York, NY)
National Confectioners Association  Asian Manufacturing LLC (Rochester 
                                    Hills, MI)
National Retail Federation          Associated Textile Mills, Inc. (Rye 
                                    Brook, NY)
Outdoor Industry Association        Auto Glass Components LLC, dba 
                                    Precision Replacement Parts 
                                    (Weston, WI)
Promotional Products Association 
International (PPAI)                B&C Technologies (Panama City 
                                    Beach, FL)
Retail Industry Leaders Association 
(RILA)                              Babco Foods International 
                                    (Piscataway, NJ)
RV Industry Association             Bakner Manufacturing (Canton, GA)
Sports & Fitness Industry 
Association                         Bazooka Candy Brands (New York, NY)
The Fashion Jewelry & Accessories 
Trade Association                   Best Deal Imports Inc. (Miami, FL)
The Flavor and Extract 
Manufacturers Association of the 
United States                       Best Flowers (San Bruno, CA)
The National Fisheries Institute    BFB Enterprises, Inc. (Panama City, 
                                    FL)
The Oriental Rug Importers 
Association, Inc.                   Boundary LLC (Salt Lake City, UT)
The Vision Council                  Bozel North America LLC 
                                    (Temperance, MI)
Travel Goods Association            Brilliant Imports LLC (Austin, TX)
U.S. Chamber of Commerce            Brockway-Smith Company (Wilmington, 
                                    MA)
U.S. Fashion Industry Association   BTR International, Inc. (New York, 
                                    NY)
3V Sigma USA Inc. (Georgetown, SC)  Burris Company, Inc (Greeley, CO)
A & J Distributors, Inc. (Itasca, 
IL)                                 Carroll Companies, Inc. (Boone, NC)
A Simpler Time (Morrisville, NC)    Chantal Corp. (Houston, TX)
Acme Food Sales, Inc. (Seattle, WA) Ciranda, Inc. (Hudson, WI)
Acumen Electronics Inc. dba Triad 
Magnetics (Perris, CA)              Classic Stone Inc. (Short Hills, 
                                    NJ)
Aditya Birla Chemicals (USA) 
(Florence, KY)                      Comeq (White Marsh, MD)
Adrienne Designs (Fountain Valley, 
CA)                                 Complete Framer's Supply, Inc. 
                                    (Fort Lauderdale, FL)
Advanced Marketing International, 
Inc. (Wilmington, NC)               Con-Tech International (New 
                                    Orleans, LA)
Aid Through Trade, Inc. (Annapolis, 
MD)                                 Cortina Leathers (Conneaut, OH)
Aladdin Gold Creations (Deerfield, 
IL)                                 Couplamatic Systems (Scottsbluff, 
                                    NE)
Albaugh, LLC (Ankeny, IA)           Cummins Inc. (Columbus, IN)
Custom Direct, Inc. (Plano, TX)      Dasan (New York, NY)
Decotone Surfaces LLC (Garwood, NJ) Deepa Gurnani LLC (New York, NY)
Douglas Autotech Corporation 
(Bronson, MI)                       India Arts, LLC (Hayward, CA)
Dynasty Gold Jewelers, Inc. (Oyster 
Bay, NY)                            Indo American Stone (Kearny, NJ)
dZi Handmade (Easthampton, MA)      International Durus (Northridge, 
                                    CA)
E&H Collections (New York City, NY) ISC Industries, Inc. (Carlstadt, 
                                    NJ)
Electrosteel USA (Birmingham, AL)   Italian Elegant (New York City, NY)
Engineered Components Company 
(Elgin, IL)                         iTi Tropicals, Inc. (Lawrenceville, 
                                    NJ)
Eppco Enterprises (Cleveland, OH)   JAJ Enterprises, LLC dba Coach 
                                    Glass (Coburg, OR)
ESTAS USA Camshaft Industry (Lake 
Forest, CA)                         Jamtown, LLC (Edmonds, WA)
Eucatex North America (Alpharetta, 
GA)                                 Jane Diaz/New York, Inc. (New York, 
                                    NY)
Fab-Line Machinery, LLC (Nashville, 
TN)                                 JBH lntertrade (Garden City, NY)
Faci USA Industrial, Inc. (Lufkin, 
TX)                                 Jelly Belly Candy Company 
                                    (Fairfield, CA)
Fahy Leathers (Pacific Palisades, 
CA)                                 JK Findings (Rochester, NY)
Fancy Imports (Los Angeles, CA)     Jubilant Industries Inc. (Yardley, 
                                    PA)
FAZ Marketing LLC (Austin, TX)      K.G. International, Inc. (Miami, 
                                    FL)
Felman Trading Americas, Inc. 
(Miami, FL)                         Kamali Group Inc. (Great Neck, NY)
First Place Jewelry (Glendale, AZ)  Kawasho Foods USA Inc. (New York, 
                                    NY)
Fitec International (Memphis, TN)   Kheops International Inc. 
                                    (Colebrook, NH)
Fuzion Creations (New York City, 
NY)                                 Kirkland Associates, Ltd. 
                                    (Mcminnville, OR)
Galaxy Imports (New York City, NY)  Kishek International (Costa Mesa, 
                                    CA)
Galaxy Sports, Inc. (South Bend, 
IN)                                 Kona Bicycle Company (Ferndale, WA)
General Carbon Corporation 
(Paterson, NJ)                      KOUBOO LLC (Laguna Beach, CA)
Gharda Chemicals International Inc. 
(Newtown, PA)                       Lamex Agrifoods Inc. (Miami, FL)
GJ Chemical (Newark, NJ)            Lawrence & Co., Inc, (New Bedford, 
                                    MA)
Global Digital Instruments LLC 
(Fairport, NY)                      Lee's Gold (Los Angeles, CA)
Global Links, Inc. (Fenton, MO)     Leila's Linen, Inc. (New York, NY)
Global Product Solutions (Canton, 
CT)                                 Lewis Trading Corp. (Springfield, 
                                    NJ)
Global Values Inc. (Palatine, IL)   Linbro Inc. (San Rafael, CA)
Golden Beach Inc. (Torrance, CA)    Lipper International Inc. 
                                    (Wallingford, CT)
Green Boy Group (Redondo Beach, CA) Mars, Incorporated (Mclean, VA)
Halsted Corporation (Cranbury, NJ)  Matr Boomie (Austin, TX)
Hardware Renaissance (Santa Fe, NM) MC Imports, LLC (Medina, MN)
Herculite Products (Emigsville, PA) MCS Jewelry (New York City, NY)
Hiblow USA, Inc. (Saline, MI)       Meadow Stream Distributing (Moline, 
                                    IL)
Hopkins Manufacturing Corporation 
(Tarpon Springs, FL)                Media Imports (Los Angeles, CA)
HRS Global LLC (Jeffersonville, IN) Metal Exchange Corporation (St. 
                                    Louis, MO)
HSV Automotive Inc (Spring, TX)     Metro Gold (Miami, FL)
Hunter Chemical (Fort Washington, 
PA)                                 Meyer Corporation, U.S. (Vallejo, 
                                    CA)
Hyline International (Valencia, CA) Midas Chain Inc. (Northvale, NJ)
In3gredients, Inc. (Chicago, IL)    Mioro Gold, LLC (New York, NY)
Monahemi (New York City, NY)        Rockford Corporation (Tempe, AZ)
Mont Granite, Inc. (Cleveland, OH)  Royal Chain Inc (New York, NY)
Montana Fly Company, Lie (Columbia 
Falls, MT)                          Royal Tropics LLC (McCall, ID)
Monte Cristo (Southfield, MN)       Samick Music Corp. (Gallatin, TN)
MS International (Orange, CA)       Samsonite International SA 
                                    (Mansfield, MA)
Musician's Mall (Berkeley, CA)      Schreiber Foods International, Inc. 
                                    (Upper Saddle River, NJ)
NAECO, LLC (Peachtree City, GA)     Scrimco Inc (Fresno, CA)
National Gold (Los Angeles, CA)     SIGMA Corporation (Cream Ridge, NJ)
Neuchem Inc. (Reno, NV)             Silvoro (Ocala, FL)
Niagara Bottling, LLC (Diamond Bar, 
CA)                                 Sintex Minerals and Services, Inc. 
                                    (Rosenberg, TX)
Nina Designs Ltd (Berkeley, CA)     SIS Jewelry (Los Angeles, CA)
Noonday Collection (Austin, TX)     Sophia Foods Inc. (Brooklyn, NY)
Nourison Industries (Calhoun, GA)   Spanish Food Solutions LLC (Great 
                                    Neck, NY)
Nova Gas Technologies, Inc. (North 
Charleston, SC)                     Starz Jewelry (Dallas, TX)
NOVICA (Santa Monica, CA)           Stoeger Industries Inc. (Accokeek, 
                                    MD)
Novita (Monrovia, CA)               Stoneia (New York, NY)
Nutri-Bon Distribution (Torrance, 
CA)                                 Strategic Sales Partners, LLC (Fort 
                                    Mill, SC)
OHM International Inc (Monroe 
Township, NJ)                       Sumitomo Electric Wintec America, 
                                    Inc. (Edmonton, KY)
Omni Surfaces Corp. (Houston, TX)   Summit Specialty International, LLC 
                                    (Atlanta, GA)
Oro Dynamics (New York City, NY)    Sunflex Packagers Inc (Cranford, 
                                    NJ)
Oxan Inc. (Buffalo Grove, IL)       Sunset Forest Porducts (Beaverton, 
                                    OR)
Pacific Jewelry (Huntington Park, 
CA)                                 Super Diamond (Long Island City, 
                                    NY)
Paradigm Trends (New York, NY)      Tesoros Trading Company (Las Vegas, 
                                    NV)
Pieces of Bali (Dripping Springs, 
TX)                                 Test Rite Products, Corp. (Ontario, 
                                    CA)
Pirate Pete's Soda Pop Co 
(Northfield, NJ)                    The Cannon Group (Westerville, OH)
Plastics Import NA (Wilmington, DE) The Gap, Inc. (San Francisco, CA)
Polinas Plastics of America 
(Englewood Cliffs, NJ)              The Home Depot (Atlanta, GA)
PolySource (Independence, MO)       Thompson Traders, Inc. (Greensboro, 
                                    NC)
Port Plastics (Azusa, CA)           Toko Indo (Orleans, MA)
Powertex, Inc. (Rouses Point, NY)   Tomoe USA Inc (Houston, TX)
Primetac (Little Ferry, NJ)         TopFlite Manufacturing Inc (Miami, 
                                    FL)
Privi Organics USA Corp. (Edison, 
NJ)                                 Tarter Corporation (Montville, NJ)
Prochimie (Windsor, CT)             Touchstone Crystal (Cranston, RI)
Quality Marble & Granite (Ontario, 
CA)                                 Trimaco, Inc. (Morrisville, NC)
R.P. ASSOCIATES, LLC. (Jefferson, 
LA)                                 Trinidad Benham Corp. (Denver, CO)
Randa Accessories (Rosemont, IL)    TRInternational, Inc. (Seattle, WA)
Raymond Mazza Inc (Brightwaters, 
NY)                                 Triton Stone Group (New Orleans, 
                                    LA)
Red Mountain Trading Co (Denver, 
CO)                                 Tyoga Container Company (Tioga, PA)
Red V Foods Corp. (Buford, GA)      Universal Arquati Moulding (Santa 
                                    Clarita, CA)
Ritika's Global Grains, LLC 
(Lexington, MA)                     Unlimited Supplies (Burr Ridge, IL)
US Asian Global Consulting 
(Prescott Valley, AZ)               West Coast Trading & Imports, Inc. 
                                    (San Francisco, CA)
US Electrofused Minerals, Inc. 
(Aliquippa, PA)                     Whistler Group (Bentonville, AR)
Vail International Corp. (New York, 
NY)                                 Willert Home Products, Inc. (St. 
                                    Louis, MO)
Varaluz LLC (Las Vegas, NV)         World Finer Foods, LLC (Bloomfield, 
                                    NJ)
Village Originals, Inc (Orlando, 
FL)                                 WorldFinds (Westmont, IL)
Vogt Power (Louisville, KY)         Xena International (Saint Charles, 
                                    IL)
Vtronix LLC (Weston, FL)            Xpres LLC (Winston-Salem, NC)
Warehouse Associates (Indianapolis, 
IN)                                 Yamaha Corporation of America 
                                    (Buena Park, CA)
Wearwell, Inc. (Smyrna, TN)         Zenegroup International Inc (El 
                                    Monte, CA)

                                 ______
                                 
          Distilled Spirits Council of the United States, Inc.

                     1250 Eye Street, NW, Suite 400

                          Washington, DC 20005

                          Tel: (202) 682-8826

                          Fax: (202) 682-8820

  Statement of Robert Maron, Vice President, International Issues and 
                                 Trade

    The following statement is submitted on behalf of the Distilled 
Spirits Council of the United States, Inc. (``DISCUS'') for inclusion 
in the printed record of the Senate Finance Committee hearing on the 
President's 2020 trade policy agenda. DISCUS is a national trade 
association representing U.S. producers, marketers, and exporters of 
distilled spirits products. Its member companies represent 
approximately 60% of all distilled spirits sold in the United States 
and approximately 75% of total U.S. distilled spirits exports. In 2019, 
U.S. distilled spirits were exported to more than 130 countries from 
small, medium, and large distillers located in 45 states. The distilled 
spirits sector directly and indirectly supports 1.64 million good-
paying jobs in every state, from the production, import, wholesale and 
retail tiers.

                              Introduction

    DISCUS and its member companies have strongly supported commitments 
by the U.S. to liberalize trade through a variety of fora and 
mechanisms. Our small, medium and large companies, their employees and 
their suppliers have benefited from the successful efforts to open 
markets for U.S. beverage alcohol exports. However, the U.S. spirits 
industry is facing significant challenges threatening to upend the 
decades of export growth. This decline in exports will continue due to 
the ongoing application of retaliatory tariffs by key trading partners 
and the impact of restrictions related to preventing the spread of 
COVID-19.

    Since 1989,\1\ the value of global U.S. distilled spirits exports 
increased by nearly 533%, from $242 million to over $1.53 billion in 
2019. This increase was driven, in large part, by the U.S. and EU 
mutual decision to eliminate import tariffs on the vast majority of 
distilled spirits products in 1997. The tremendous U.S. export growth 
has resulted in a wide range of products becoming available to adult 
consumers, which has contributed to evolving consumer tastes and 
increasing demand. To meet this consumer demand, beverage alcohol 
companies diversified their portfolios with products from around the 
world and the U.S. and European Union (EU) spirits sectors, in 
particular, have become very interconnected. As discussed in detail 
below, in 2018 the EU imposed a 25% retaliatory tariff on all American 
Whiskeys. As a result, in 2019 total U.S. spirits exports declined by 
14.3% to $1.5 billion and American Whiskey exports declined by 16% to 
$996 million, as compared to 2018. American Whiskey drives U.S spirits 
exports and accounted for 65% of total American spirits exports in 
2019.
---------------------------------------------------------------------------
    \1\ 1989 is the first year U.S. trade data is available on the U.S. 
International Trade Commission Data Web.

    Securing the elimination of tariffs on distilled spirits as states 
and cities and key trading partners move to slowly reopen bars and 
restaurants provides an opportunity to support U.S. distilled spirits 
---------------------------------------------------------------------------
producers, importers and exporters.

I. U.S. Spirits Industry Has Benefited from Market-Opening Trade 
Agreements

    DISCUS and its members have strongly supported comprehensive trade 
agreements that eliminated tariffs and included other provisions to 
protect U.S. spirits products, such as recognition for distinctive U.S. 
spirits (e.g., Bourbon and Tennessee Whiskey). These have been vital to 
opening new markets and keeping them open for U.S. spirits exports. 
However, retaliatory tariffs by key trading partners, particularly the 
EU are eroding the benefits of such trade agreements.

    Exports to our trading partners, which have agreed either through 
multilateral, regional, or bilateral trade agreements, to eliminate 
tariffs on U.S. spirits reached $1.2 billion in 2019, accounting for 
80% of global U.S. spirits exports. In 2019, U.S. distilled spirits 
exports to bilateral and regional free trade agreement (FTA) partners 
totaled $487 million, accounting for nearly \1/3\ of global U.S. 
spirits exports. In fact, between 2000 and 2019 exports to FTA trading 
partners have grown at a faster rate (355% increase) than U.S. 
distilled spirits exports to non-FTA partners (211% increase). Clearly, 
the elimination of tariffs leads to an increase in U.S. spirits 
exports.

    In particular, the tariff elimination commitments regarding 
distilled spirits products secured during the Uruguay Round, which led 
to the development of the World Trade Organization (WTO) in 1994, and 
subsequent negotiations under the U.S. government's ``zero-for-zero'' 
initiative have paved the way for a significant increase in U.S. 
distilled spirits exports. At the outset, participation in the spirits 
``zero-for-zero'' was limited to the U.S. and the EU. However, other 
countries, including Japan, Canada, Macedonia, Taiwan, and Ukraine have 
since also agreed to eliminate tariffs on spirits imports on a Most 
Favoured Nation (MFN) basis.

    Since the ``zero-for-zero'' agreement came into effect in 1997, the 
value of U.S. spirits exports to the EU increased by 186%, from $209 
million to nearly $600 million in 2019. The ``zero-for-zero'' agreement 
continues to produce benefits for U.S. spirits exports. Specifically, 
as countries have joined the EU, they are required to adopt the EU's 
common external tariff, which, in the case of distilled spirits is zero 
for practically all spirits. For example, exports to Latvia, which is 
currently the 10th largest destination for U.S. distilled spirits, 
increased by almost 2,788%, from $1.8 million in 2004 when it joined 
the European Union, to $52 million in 2019. Similarly, exports to 
Poland, which is the 14th largest market, increased by nearly 2,155%, 
from $1.1 million in 2004 when it joined the European Union to $53.6 
million in 2019. Prior to Poland joining the European Union, U.S. 
spirits faced tariffs ranging from 75% to 105% ad valorem.

    Moreover, since Taiwan eliminated its tariffs in 2002, U.S. 
distilled spirits exports to Taiwan increased by nearly 260%--from $1.1 
million to $4.3 million in 2019. In the case of Japan, U.S. distilled 
exports grew from $71.8 million in 2002, when the tariff was 
eliminated, to $138 million in 2019, representing a growth rate of 92%.

II. American Spirits Exports Tumble Due to Retaliatory Tariffs

    As noted above, trade agreements and the elimination of tariffs on 
U.S. spirits exports have directly resulted in an increase in U.S. 
spirits exports. However, in mid-2018, retaliatory tariffs on U.S. 
spirits were implemented by the EU, Canada, Mexico, Turkey, and China. 
In May 2019, the United States, Canada, and Mexico reached an agreement 
that resulted in the repeal of retaliatory tariffs on American Whiskey 
exports to Canada and Mexico.

    Due to the application of retaliatory tariffs by the EU, China and 
Turkey, U.S. distillers of all sizes have had export contracts canceled 
and distribution negotiations postponed. In addition, many U.S. 
distillers have put expansion and investment plans on hold 
indefinitely. The impact is felt across the U.S. throughout the entire 
supply chain, from farmers to suppliers. In 2019, there were over 2,000 
distillers in the U.S.; American spirits were exported from 45 states 
and American Whiskeys exported from 39 states. These tariffs are making 
American Whiskeys less competitive and may result in international 
spirits consumers choosing other spirits categories that already 
provide stiff competition in some third markets. These markets may be 
lost as foreign adult consumers shift to distilled spirits produced 
domestically or by our global competitors. Below please find a detailed 
review of the impact of the retaliatory tariffs that are currently 
being applied to the U.S. spirits exports.

    EU: Since June 22, 2018, the EU has imposed a retaliatory tariff of 
25% on all American Whiskey imports in response to U.S. actions on 
steel and aluminum. The EU's retaliatory tariff on American Whiskey 
will increase to 50% in June 2021 if the disputes are not resolved. 
From January 1997 through June 2018, American Whiskey exports to the EU 
grew five-fold from $143 million to over $750 million. The EU's 25% 
retaliatory tariff on American Whiskey caused exports to the EU to 
tumble 333%.\2\ The retaliatory tariffs have upended decades of growth 
for the U.S. spirits sector in the EU market, which accounted for 
nearly 52% of total American Whiskey exports in 2019. According to an 
analysis by DISCUS, had the tariffs not been implemented, American 
Whiskey exports today would be an estimated $300 million higher.
---------------------------------------------------------------------------
    \2\ June 2018 was the date that the tariffs went into effect. April 
2020 is the last month for which data is available. Reflects the value 
of exports for the 12 month rolling periods July 2017-June 2018 ($757M) 
and May 2019-April 2020 ($504M).

    Below is an illustrative list of small and medium distilleries from 
across the U.S. describing how their companies have been negatively 
---------------------------------------------------------------------------
affected by the EU's retaliatory tariff on American Whiskey:

        Cedar Ridge Distillery (Swisher, Iowa): ``We were off to a 
great start with some EU partners but since the implementation of these 
retaliatory tariffs from the EU, our European exports have been flat, 
at best,'' said Jeff Quint, Founder/CEO. ``At this point we are really 
only able to `tread water.' We are trying hard to maintain our EU 
business, but can't really grow it unless and until these tariffs go 
away.''

        James E Pepper Distillery (Lexington, KY): Amir Peay, owner 
said, ``Before the EU tariffs on American Whiskey were imposed we had 
been growing our exports significantly and they accounted for 10 
percent of our total business. We were planning on doubling our 
business in Europe and made significant effects to that end--and then 
we got hit with the trade war. Since then, we have lost 50 percent of 
our EU business and continue to face a very difficult and complex 
market to do business in.''

        KOVAL Distillery (Chicago, IL): Sonat Birnecker Hart, 
president and owner stated, ``Our international trade has been 
dramatically affected, not least because much of the European 
hospitality sector was closed for business for a number of months due 
to COVID-19. The tariffs have exacerbated this situation, as many 
distributors are trying to recoup losses by asking for lower prices. As 
a distillery that decided not to increase our prices abroad due to the 
tariffs, in hopes of remaining competitive, we are feeling the effects 
of them now, more than ever.''

    China: Since July 6, 2018, China has imposed a retaliatory tariff 
on American Whiskey and has imposed a retaliatory tariff on rum, gin, 
vodka, liqueurs, brandy and some ``others'' since September 24, 2018, 
in response to the U.S. Section 301 actions. In 2019, U.S. spirits 
exports to China reached $17.8 million, down 1 percent from 2018. 
However, this follows years of steady growth. Over the past 5 years 
(2014-2019), American spirits exports to China increased by nearly 25% 
and approximately 127% over the past decade. American spirits exports 
to China between January-April 2020 (latest data available) are down 
47% as compared to the same period in 2019 and 46% compared to the same 
period in 2018.

    Turkey: Since June 21, 2018, Turkey has imposed retaliatory tariffs 
on all U.S. distilled spirits in response to the steel and aluminum 
tariffs. Originally, Turkey applied a 70% tariff, but increased it to 
140% on August 15, 2018. On May 21, 2019, Turkey reduced its tariff to 
70%. In 2019, U.S. spirits exports to Turkey reached $10.4 million, 
down 40% as compared to 2018.

    Additional U.S. spirits may face retaliatory tariffs from the EU in 
the second half of 2020 in connection with the WTO U.S.-EU civil 
aviation subsidy dispute. This summer, a WTO Arbitrator will announce a 
decision concerning the value of U.S. imports upon which the EU may 
impose tariffs in its case against the U.S. The EU previously indicated 
it would consider imposing retaliatory tariffs on several categories of 
U.S. spirits, including rum, vodka, and brandy. In 2019, the value of 
these exports to the EU was $38 million.

III. U.S. Tariffs on EU Distilled Spirits Are Impacting U.S. Jobs

    As a result of the important market-opening agreements highlighted 
above, the U.S. and EU beverage alcohol sectors are deeply integrated 
with companies owning a range of U.S. and EU spirits. Many companies 
have made considerable investments in both the U.S. and the EU to 
successfully create complementary product portfolios with brands from 
both the U.S. and EU to satisfy consumer demands. While tariffs imposed 
on EU spirits may appear to only harm EU companies, this is simply not 
the case. The same is true for EU tariffs on American spirits. Thus, 
imposing tariffs on imported spirits compounds the negative impact on 
companies that are already suffering the damaging effect of the EU's 
current retaliatory tariff on American Whiskey and the broader impact 
of the COVID-19 pandemic. Since retaliatory tariffs on imports are, in 
effect, taxes, imposing tariffs on EU beverage alcohol imports will 
have the unintended consequence of also harming U.S. consumers of these 
products.

    On October 18, 2019, the U.S. imposed tariffs on certain EU 
beverage alcohol imports in connection with a 15-year dispute at the 
WTO concerning civil aviation subsidies. Specifically, the U.S. 
beverage alcohol industry now faces a 25% tariff on ``single malt 
Scotch Whisky;'' ``single malt Irish Whiskey'' from Northern Ireland, 
Liqueurs/Cordials from Germany, Ireland, Italy, Spain and UK, and 
certain wines from France, Germany, Spain and UK. On June 26, 2020 USTR 
issued a Federal Register notice in connection with the dispute seeking 
feedback on revising the product list/tariff levels. In addition, USTR 
included a new ``supplemental list'' of EU products which, in a 
troubling development, includes vodka and gin from the UK, Germany, 
France and Spain that could potentially be subject to additional 
tariffs.

    Anecdotal evidence is emerging to suggest that the 25% tariff on 
these specific EU beverage alcohol products is already causing damage 
to U.S. businesses of all sizes and resulting in U.S. job losses, which 
is being compounded by the impact of COVID-19. We estimate if tariffs 
on the spirits and wine products imported from the EU included on the 
April and July 2019 lists remain in effect or are in creased, it could 
lead to a loss of approximately 11,200 to 78,600 U.S. jobs.

IV. DISCUS Strongly Supports New Market-Opening Trade Agreements

    In light of the significant headwinds the U.S. spirits sector 
faces, DISCUS reiterates its support for new market-opening agreements. 
We believe new agreements are vital to help return the U.S. spirits 
sector to the strong growth it has experienced over the past 30 years. 
DISCUS supported the Administration's effort to modernize the North 
American Free Trade Agreement and to secure Congressional approval of 
the U.S.-Mexico-Canada Agreement (USMCA) implementing bill. DISCUS also 
supports the Administration's proposal to negotiate trade agreements 
with the EU, the UK, and Japan and urges the Administration to continue 
its negotiations with Japan to secure a comprehensive agreement.

    DISCUS has had a long and active involvement with the WTO and 
remains a strong supporter of the organization and ongoing efforts to 
liberalize global trade further and strengthen the rules-based 
multilateral trading system. Unquestionably, the package of agreements 
concluded in the Uruguay Round, which led to the establishment of the 
WTO in 1994, has significantly benefitted the U.S. distilled spirits 
sector.

V. Other Trade Barriers Negatively Impacting American Spirits Exports

    In addition to retaliatory tariffs, several priority target markets 
apply discriminatory spirits taxes in favor of domestically-produced 
spirits, maintain high tariffs and/or an array of non-tariff barriers 
to U.S. spirits, which inhibit the sector's long-term growth prospects. 
For example, India maintains an excessive tariff on imports of bottled 
spirits of 150% ad valorem, Brazil maintains a tariff of 12% ad valorem 
for bulk whiskey and 20% ad valorem for other distilled spirit 
products, and Vietnam imposes a 45% ad valorem tariff. In addition, 
Thailand, Peru, Brazil, and the EU continue to apply discriminatory 
spirits taxes in favor of domestically-produced spirits which distort 
the market in violation of the national treatment provisions of GATT 
Article III, paragraph 2. Furthermore, labeling requirements under 
consideration in Thailand, Ireland, South Africa and elsewhere, which 
are inconsistent with standard international practices, could impose 
unnecessary barriers to entry for U.S. spirits exporters.

    A comprehensive overview of trade barriers to U.S. distilled 
spirits exports can be found in DISCUS' 2019 National Trade Estimates 
submission to USTR which can be viewed at the following link: https://
www.distilledspirits.org/wp-content/uploads/2019/11/Distilled-Spirits-
Council-of-the-US-NTE_2020.pdf.

                               Conclusion

    In summary, the U.S. distilled spirits industry has benefitted 
significantly from the comprehensive multilateral, regional and 
bilateral trade agreements the U.S. has concluded. However, the 
continued imposition of retaliatory tariffs and the outbreak of COVID-
19 are having a significant negative impact on the sector. For these 
reasons, our top priority is to request Congress continue to urge the 
Administration to engage with their EU counterparts toward a 
simultaneous removal of tariffs on U.S. and EU distilled spirits 
products. In addition, we urge the Administration to pursue new market 
opening and comprehensive trade agreements for U.S. spirits exports.

    Our EU counterparts share our strong opposition to the application 
of any tariffs on distilled spirits. EU spirits associations are 
strongly urging the Commission to remove the EU's retaliatory tariff on 
American Whiskey as soon as possible and not to include U.S. spirits on 
its final list of products for tariffs in the WTO civil aviation 
dispute. Removing tariffs on distilled spirits provides an opportunity 
for both the EU and the U.S. to support jobs on both sides of the 
Atlantic during this period of tremendous economic uncertainty.

    Furthermore , enacting the Craft Beverage Modernization and Tax 
Reform Act (H.R. 1175/S. 362) to make the current federal excise tax 
rates permanent and an extension of the duty and excise tax deferral 
with a broadening of the scope of tariffs that may be deferred and a 
modification to the ``hardship test'' will provide significant 
liquidity and help companies stabilize their finances and long term 
planning during these unprecedented times.

    Thank you again for the opportunity to provide the U.S. spirits 
sector's views. Please do not hesitate to contact us if we can provide 
any additional information.

    Thank you very much for your consideration.

                                 ______
                                 
                            Engine Advocacy

                      700 Pennsylvania Ave., S.E.

                          Washington, DC 20003

    As a non-profit research and advocacy organization focused on 
promoting pro-
innovation policies that support the growth of tech startups, we 
appreciate your interest in the administration's trade policy agenda 
for 2020 and the impact these priorities may have on startups and the 
technology sector. Beyond core concerns like access to capital and 
qualified talent, startups currently face uncertainty with respect to 
anti-tech initiatives by trading partners, like the implementation of 
discriminatory digital services taxes. Moreover, startups are greatly 
impacted by the trade agreements to which the United States becomes a 
signatory, as they rely on certainty in digital trade in order to 
compete in an increasingly connected world. Engine is grateful for the 
opportunity to provide feedback on these important aspects of U.S. 
trade policy.

I. The Impact of Digital Services Taxes on Startups

    As Engine noted in previous comments to the United States Trade 
Representative (USTR) regarding its 301 investigation into a French 
digital services tax (DST), the implementation of the French DST would 
have negative consequences for the United States economy on the whole, 
would embolden other nations to pursue discriminatory DST regimes, and 
would have a negative impact on startups seeking to establish 
themselves and grow internationally.\1\ This holds true for other 
countries seeking to do the same.
---------------------------------------------------------------------------
    \1\ See Engine's comments to the USTR regarding their 301 
Investigation of the proposed French Digital Services Tax, available 
at: http://engine.is/s/Engine-Comments-USTR-France-DST.pdf.

    Startups and small businesses are drivers of the U.S. economy and 
represent a large source of job creation in the United States. While 
the proposed or enacted DSTs of many countries are targeted at only the 
largest firms that provide products such as online intermediation 
services and targeted digital advertising sales, Engine remains 
concerned that these duplicative and discriminatory taxes aimed largely 
at U.S. companies could ultimately have an outsized and negative impact 
on the startup community. Initial studies of the proposed French DST 
indicated that the cost of the tax-while targeted at large companies-
would instead largely be borne by the consumers and businesses, like 
startups, that use their services.\2\ Startups often rely on the 
services provided by large Internet companies to launch their 
businesses. Passing the tax burden from DSTs onto users will result in 
higher costs for free or low-cost services that nascent companies 
currently rely on to grow their businesses, giving these services an 
outsized value to startups.\3\ Therefore, levying a tax on the largest 
firms could lead to a decrease in overall competition in the digital 
marketplace, since the largest firms are both in the best position to 
shoulder an increased tax burden where smaller companies cannot, and 
because many of these large firms will simply pass the cost of the tax 
onto their users. Startups with shoestring budgets will simply face 
greater barriers to market entry, and will likely be unable to afford 
higher prices for the low-cost services on which they rely.\4\ 
Moreover, many of these taxes-like the French DST-are taxes on revenues 
as opposed to profits.\5\ Shifting the tax burden onto consumers could 
lead to these low-profit companies no longer being competitive, and 
could cause these high-revenue, low-profit companies to shutter their 
doors completely.\6\
---------------------------------------------------------------------------
    \2\ Deloitte, Taj, ``The French Digital Services Tax: An Economic 
Impact Assessment'' (2019), available at: https://taj-strategie.fr/
content/uploads/2020/03/dst-impact-assessment-march-2019.pdf.
    \3\ See Engine, supra note 1.
    \4\ Id.
    \5\ Daniel Bunn, ``The U.S. Trade Representative Expands Its 
Digital Services Tax Investigations'' (June 2, 2020), available at: 
https://taxfoundation.org/us-trade-representative-ustr-digital-
servicest-ax-investigations/.
    \6\ Matthias Bauer, European Center for International Political 
Economy, ``Five Questions about the Digital Services Tax to Pierre 
Moscovi'' (June 2018), available at: https://ecipe.org/publications/
five-questions-about-the-digital-services-tax/, and Engine supra note 
1.

    Earlier this month, the USTR announced a 301 investigation into the 
proposed or enacted DSTs of several countries and jurisdictions, 
including: Austria, Brazil, the Czech Republic, the European Union, 
India, Indonesia, Italy, Spain, Turkey and the United Kingdom.\7\ While 
many of these taxes apply only to companies with significant revenue, 
some have unclear or lower revenue thresholds. The expansion of India's 
``equalization levy,'' targets non-resident companies that sell more 
than $267,000 ``of in-scope goods or services to Indian customers.''\8\ 
While many of these taxation schemes are designed to hold small 
businesses harmless, taxes that apply to revenue instead of profit may 
serve to capture newer companies with high funding streams but low 
profitability.\9\ This would have a disparate impact on companies with 
low margins or net operating losses.\10\ When the European Commission 
was first considering an EU-wide DST, one study found that a three 
percent tax on the revenue of a company with a five percent profit 
margin amounted to a corporate tax rate of 60 percent.\11\ As Engine 
previously noted in comments to the USTR, ``at a time where Congress 
and the Administration is investigating the market dominance of a few 
large digital platforms, enabling a digital services tax that only 
those few, large platforms can bear or navigate, eliminates new and 
smaller platforms' ability to compete in the market,'' and leaves only 
the largest companies behind.\12\
---------------------------------------------------------------------------
    \7\ Initiation of Section 301 Investigations of Digital Services 
Taxes, 85 Fed. Reg. 34,709 (June 5, 2020).
    \8\ Id. and Daniel Bunn, ``India Pushes Digital Taxes in a 
Difficult Time'' (March 26, 2020), available at: https://
taxfoundation.org/india-digital-tax-in-a-difficult-time/.
    \9\ Bauer, supra note 6.
    \10\ Id.
    \11\ Id.
    \12\ See Engine, supra note 1.

    Moreover, some of the jurisdictions under investigation are 
discriminatorily implementing taxes only on non-resident companies. 
That means these countries are trying to give an unfair advantage to 
the businesses originating within their borders, benefiting their 
startups and small businesses at the expense of those based in America. 
As Engine previously stated in regards to France's proposed DST, though 
``many American startups do not currently fall within the revenue scope 
outlined by France's DST, the tax does not operate in isolation. It 
will still have a large and detrimental effect on American startups. It 
is anti-growth and will increase costs on some of our country's 
fastest-growing and most innovative companies.''\13\ The same would 
hold true for DSTs implemented by other nations. Simply put, DSTs are 
being proposed and implemented more frequently by a wider range of 
jurisdictions, and they are disproportionately aimed at large American 
companies.
---------------------------------------------------------------------------
    \13\ Id.

    While the iterations of the earliest proposed DSTs are and were 
problematic in and of themselves, Engine only expects to see more 
discriminatory tax strategies appear-particularly as more jurisdictions 
seek to implement these tax schemes, and as more jurisdictions face 
larger budgetary shortfalls due to the COVID-19 pandemic. Moreover, we 
are concerned that these taxes will begin to apply to companies at even 
lower revenue thresholds. While the United States and France were able 
to come to an agreement to postpone the implementation of the French 
DST earlier this year, it is unclear whether other jurisdictions will 
---------------------------------------------------------------------------
also hold off on implementing their DSTs.

    We are also concerned that the enactment of DSTs by such a wide 
range of jurisdictions would result in an extensive patchwork of 
similar, but materially different, international tax laws. This would 
not only prove to be costly, but would also present a huge compliance 
burden for both the companies subject to the tax, and other firms that 
are uncertain as to whether or not the DSTs apply to them. This 
potential patchwork of laws might be enough to dissuade smaller digital 
companies from expanding or possibly even launching, all because of an 
inability to navigate complex international taxation regimes. Moreover, 
as Engine has noted in the past, we must consider the effect these 
taxes will have in the longer term. What will happen to companies that 
currently do not meet the revenue threshold, but may in the future? 
Much like the U.S.'s corporate Alternative Minimum Tax did, and the 
estate tax does now, DSTs could force businesses to undertake 
complicated and expensive tax planning to avoid the levies, which 
``could further distort incentives and divert capital away from 
research and other growth opportunities to tax planning.''\14\ As 
Engine has previously stated, taxes are powerful disincentives and 
negative motivators.\15\
---------------------------------------------------------------------------
    \14\ Id.
    \15\ Id.

    Finally, these DSTs may cause uncertainty when it comes to the 
future options of startups, potentially limiting the exit strategies 
for some founders. Many startups generate little profit, if any, in 
their early stages, with founders often choosing to invest capital back 
into the company. At times, founders choose to sell to or merge with 
larger companies to offset some of the risks associated with launching 
their startups. DSTs, however, may place a question mark over the 
viability of this off ramp. Would a company that was under the 
threshold for a DST, but is then acquired by or merges with a larger 
company, then be subjected to a DST? Does the company being acquired 
have the administrative procedures in place to calculate its liability 
under the tax? Will the potential to reach the threshold of being 
subjected to a digital services tax negatively affect a company's 
potential for acquisition? Will larger firms not yet subject to DST's 
have incentives not to merge with or acquire promising startups, so as 
to not reach the threshold triggering a DST? That uncertainty, 
regardless of how the tax itself will affect the economics of 
acquisition, is enough to make such acquisitions less frequent and less 
desirable. Taxes create strong incentives and disincentives-that's why 
governments often use them to drive policy. As more jurisdictions seek 
to adopt differing DSTs, American companies could see insurmountable 
barriers to acquisitions. As Engine previously stated to the USTR, the 
enactment of DSTs ``could mean a net-loss in innovation for the United 
States. Revolutionary and innovative startups might never find the 
opportunity to achieve the growth or economies of scale required to 
share their services and ideas globally.''\16\
---------------------------------------------------------------------------
    \16\ Id.

    Engine is encouraged by the Administration's strong position in 
protecting American companies from discriminatory and overly burdensome 
digital services taxes. Engine recognizes that the growth of the 
digital age has brought forth a need to reassess the international tax 
framework at-large, but a country-by-country approach that largely 
targets American companies is not the way to accomplish this goal. Any 
decision made with respect to digital services taxes must consider the 
potential hardship to the U.S. startup ecosystem, and prevent a 
trickle-down effect of costs that could prevent American digital 
---------------------------------------------------------------------------
companies from being globally competitive.

II.  Intermediary Liability Protections in Trade Agreements Are 
Integral to Startup Survival

    When the United States negotiates trade agreements, it does so with 
the purpose of ensuring that American companies--including startups--
enjoy a similar legal framework abroad as they do domestically. This 
certainty is critically important for smaller startups that do not have 
the ability or the resources to navigate complex and differing 
international laws, allowing them the opportunity to compete in an 
increasingly global ecosystem. Including strong digital trade 
protections in trade agreements gives startups the security they need 
to grow and expand their reach outside of the United States.

    It is essential that intermediary liability protections, which 
shield smaller digital startups from potentially ruinous litigation for 
hosting user-generated content, have a place in these negotiations. 
These protections have been enshrined in U.S. law for over two decades. 
Similar language was also included in both the United States-Mexico-
Canada Agreement (USMCA) and the U.S.-Japan Trade Agreement. Some 
members of Congress have expressed concern about inclusion of 
intermediary liability protections for Internet platforms in future 
trade agreements, incorrectly referring to these as a ``gift'' to ``big 
tech.'' But these provisions are not the ``boon'' for big tech firms 
that critics make them out to be; rather, the protections found in CDA 
230, 17 U.S.C. Sec. 512, and in Articles 19.17 and 20.88 of USMCA help 
companies of all sizes host and potentially remove user-generated 
speech without the fear of facing ruinous, frivolous litigation.

    The assertion by some Senators and the Administration that 
intermediary liability protections should not be included in future 
trade agreements because the law is contentious is off-base. Ambassador 
Lighthizer previously indicated that it is generally a goal of trade 
negotiations to ensure that U.S. law is incorporated into trade 
agreements. At the hearing, he further iterated this point, stating 
that it is not the role of USTR to write changes to Section 230 into 
trade agreements and subsequently into U.S. law, but instead rather to 
write existing U.S. law into trade agreements.\17\ As Engine previously 
stated, ``not including standard provisions of U.S. law in trade 
agreements because Congress may choose at some point to legislate would 
result in never or rarely engaging in trade agreements.''\18\ Nor does 
including these provisions tie Congress' hands in legislating on 
intermediary liability in the future.\19\
---------------------------------------------------------------------------
    \17\ See Oral Testimony of USTR Robert Lighthizer, available at: 
https://www.finance.senate.
gov/hearings/the-presidents-2020-trade-policy-agenda.
    \18\ Jennifer Weinhart, ``Trade Agreements Give Startups 
Certainty'' (December 5, 2019), available at: https://www.engine.is/
news/trade-agreements-can-give-startups-certainty.
    \19\ Id.

    Critics of intermediary liability protections similarly miss the 
mark when calling for changing or repealing Section 230 and caution 
against including similar language in trade agreements because of the 
substance of the language. Intermediary liability protections are not a 
gift to large tech companies. These large firms have the financial 
means to survive with or without Section 230 and similar protections 
included in trade agreements. They can afford to hire an army of 
content moderators to police user-generated content. They also can 
afford to invest in costly filtering tools and they have the resources 
to navigate a patchwork of international laws pertaining to content 
moderation. These options are generally out of reach for nascent 
startups operating on bootstrap budgets with minimal staff. Rather, the 
inclusion of intermediary liability provisions gives startups the 
certainty they need to expand and operate across an increasingly 
connected world, with some certainty that they won't be forced to 
shutter their doors because of costly litigation stemming from user-
---------------------------------------------------------------------------
generated content.

    Some critics of Section 230 and similar language in trade 
agreements allege that platforms avail themselves of this language to 
cover up for blatantly illegal activity. This claim, too, is patently 
false. These protections in no way shield companies from consequences 
for violating federal criminal law. Instead, peddling this false 
narrative only further contributes to the uncertainty startups already 
face when seeking to establish themselves and host user-generated 
content.

    Section 512 of the DMCA, which establishes the notice-and-takedown 
and safe harbor framework for addressing allegations of online 
copyright infringement, has and continues to successfully balance the 
interests of copyright owners, Internet platforms, and the users and 
small creators who rely on the vibrant innovative and creative 
ecosystems that Sec. 512 makes possible. U.S. law provides emerging 
Internet businesses with certainty that accusations their users are 
infringing copyright (infringement the companies have no knowledge of 
or direct involvement in) does not automatically strap them with 
unaffordable legal exposure and put them on the fast track to 
insolvency. Changes to the existing balance--and a failure on the part 
of the U.S. to push for similar provisions in trade agreements--would 
have an outsized and negative impact on startups. Here again, large 
companies may be able to afford filtering technologies that attempt to 
catch potential infringement, and can afford to defend themselves in 
litigation. But startups are not able to face those costs. Today's 
emerging Internet businesses rely on and need the same certainty 
afforded to their predecessors.

    The average startup launches with less than $80,000 in capital, a 
minimal staff, and founders who often do not take a salary.\20\ Looking 
at the U.S. legal system it is clear why these intermediary liability 
protections are necessary. Maintaining robust intermediary liability 
protections and expanding these protections to trade agreements to 
which the United States is a party are essential to ensuring startups 
can both establish themselves and compete globally. As Engine has 
stated in the past, ``enshrining digital provisions rooted in U.S. law 
is good for American businesses and is crucial for startups and small 
businesses to even consider entering a globally competitive 
marketplace.''\21\ Engine encourages policymakers to not simply look at 
intermediary liability provisions with a focus on large Internet 
platforms--after all, these platforms will continue to exist with or 
without the protections. Rather, lawmakers should recognize these 
intermediary liability provisions are most important for startups to be 
able to compete both at home and abroad. Eliminating or weakening 
intermediary liability provisions domestically, and failing to include 
them in future trade agreements, will only serve to limit competition 
to the largest Internet platforms. Startups simply will not be able to 
compete if forced to shoulder the burden of meritless lawsuits 
pertaining to user-generated content.
---------------------------------------------------------------------------
    \20\ Fundable, ``Startup Funding Infographic,'' available at: 
https://www.fundable.com/learn/resources/infographics/startup-funding-
infographic.
    \21\ Weinhart, supra note 18.
---------------------------------------------------------------------------

III. Conclusion

    Engine appreciates the opportunity to provide comments for the 
record on the U.S. 2020 trade policy agenda, and is happy to be a 
resource for the Committee on how American trade policy impacts 
startups. We look forward to further engaging with the Committee on 
issues affecting startups in the future.

                                 ______
                                 
                     Flexible Packaging Association

                 185 Admiral Cochrane Drive, Suite 105

                          Annapolis, MD 21401

                           Tel (410) 694-0800

                           Fax (410) 694-0900

                            www.flexpack.org

         Statement of Alison Keane, IOM, CAE, President and CEO

My name is Alison Keane, and I am the President and CEO of the Flexible 
Packaging Association (FPA). FPA, which is the voice of U.S. 
manufacturers of flexible packaging and their suppliers, continues to 
be troubled by the President's Trade Policy, specifically with regard 
to aluminum foil tariffs.

At a time when sterile packaging for food, health and hygiene, and 
medical equipment is more important than ever, and as U.S. 
manufacturers are suffering from the worst economy in decades, the 
Administration should be looking at ways to alleviate supply chain 
burdens, not increase them. Instead, the Department of Commerce 
continues to exacerbate our trade war, especially concerning the 
Section 232 aluminum tariff exclusions and the new monitoring proposal 
and rumors of the tariff being reinstated on Canadian foil, despite the 
implementation of USMCA. FPA does not support the additional controls 
contemplated for the Section 232 exclusionary process and the proposed 
rule to establish an Aluminum Import Monitoring and Analysis (AIM) 
system, and is troubled that the President may be considering 
reinstating tariffs on the industry's biggest trading partner, Canada.

Flexible packaging represents $33.6 billion in annual sales in the U.S. 
and is the second largest and one of the fastest growing segments of 
the packaging industry. The industry employs approximately 80,000 
workers in the United States and is deemed an Essential Critical 
Infrastructure Workforce by the Department of Homeland Security. 
Flexible packaging is produced from paper, plastic, film, aluminum 
foil, or any combination of these materials, and includes bags, 
pouches, labels, liners, wraps, rollstock, and other flexible products. 
Concerning the tariff impacts, aluminum foil is used for packaging as 
it provides the barrier protection needed from oxygen, light, moisture, 
and bacteria that food, health and hygiene, and medical supplies need 
to ensure stable shelf life, freshness, and sterility.

The Section 232 investigation on aluminum, which resulted in the 10% 
tariff on aluminum, including foils produced from that aluminum, was 
initiated under the Trade Expansion Act of 1962, and was to determine 
what, if any, effects imports of aluminum have on national security. 
FPA is not aware of any impacts aluminum foil imports for use in the 
packaging industry has on U.S. national security and the Department of 
Commerce Report entitled ``Effects of Aluminum Imports on the National 
Security,'' (report) did not specify any. Nevertheless, the tariffs 
were imposed and these import restrictions have had a significant 
negative impact on the flexible packaging industry and its employment 
in the U.S.

While FPA supported the adoption of exclusions from the tariffs where 
aluminum articles are not produced in the U.S. ``in a sufficient and 
reasonably available amount or of satisfactory quality,'' the process 
for exclusions is arduous and slow, and in some cases, results in 
conflicting approvals and denials. Additionally, manufacturers must 
apply for the exclusion annually, regardless of whether or not there 
has been a change in circumstances. In the case of fine gauge aluminum 
foil used by flexible packaging manufacturers, the domestic supply of 
the product has only gotten scarcer. Despite the Section 232 tariffs, 
as well as the significant Anti-
dumping and Countervailing (AD/CVD) duties placed on Chinese aluminum 
foil imports, one of the only companies in the U.S. supplying light 
gauge foil chose to close its doors.

As FPA stated in numerous letters and in its testimony to the 
Department, there was never sufficient supply in the U.S. of aluminum 
foil for flexible packaging to begin with, which is why imports were 
necessary. Instead of production moving back to the U.S., it simply 
moved out of China to other parts of the world. Flexible packaging 
manufacturers have in some cases moved away from foil, substituting 
non-foil barrier structures, which also does nothing to assist the 
aluminum industry in the United States. Given that there is not enough 
supply or quality of the foil to meet flexible packaging manufacturers 
need in the U.S. As a result, the exclusionary process is the only 
avenue with which to secure aluminum foil for the packaging that 
requires its use, especially at this time of national emergency when 
the public's health and safety are more important than ever.

FPA supports efforts to protect domestic manufacturing and ensure 
national security. However, aluminum foil used by the flexible 
packaging industry is not manufactured in the U.S. in the quantities 
and qualities needed. Since domestic producers made strategic decisions 
not to participate in the thin gauge aluminum foil market--they cannot 
now blame imports for filling a void left by their inaction. Failure to 
invest, and quality lapses, including gauge, width, and lack of 
appropriate alloys all contribute to the fact that the U.S. producers 
of aluminum foil are not able to serve the U.S. flexible packaging 
industry. Flexible packaging manufacturers simply have nowhere to turn 
but to bring in the vast majority of the aluminum foil they need 
through imports. Manufacturers often must file exclusions for more than 
they need to give them options on width and gauge, to plan for price 
fluctuations and lead times, and to meet increased demand, such as with 
today's COVID-19 response. To lock into one or more limited suppliers 
and only file for historical demand means that prices will soar and 
U.S. manufacturers' flexibility to modify or source new demand will be 
severely restricted.

For these reasons, FPA does not support the additional controls 
contemplated for the Section 232 exclusionary process and the proposed 
rule to establish an AIM system. FPA instead suggests that unless and 
until the Department can show evidence that aluminum foil for the U.S. 
flexible packaging industry is manufactured in the U.S. in the quantity 
and quality needed, these tariffs be suspended in their entirety. This 
action would immediately free up billions of dollars of working capital 
for American companies, sustaining and creating thousands of jobs in 
the U.S., and would provide relief to manufacturers that have no choice 
but to import to continue to provide for the public demand during this 
time of national crisis. Similarly, to reinstitute tariffs on Canadian 
imports, which are covered by the USMCA is not only bad public policy, 
it is defaulting on an international agreement.

Keep in mind, these are products that you and I use every day--
including hermetically sealed food and beverage products such as candy, 
salty snacks, yogurt, beverages, and infant formula; and health and 
hygiene items and pharmaceuticals, such as aspirin, shampoo, shaving 
cream, and yes even flexible packaging for COVID-19 antibody test kits. 
Aluminum foil is also used by the flexible packaging industry to ensure 
sterility and efficacy for medical device packaging, enabling the 
products packaged, such as absorbable sutures, human tissue, and 
artificial joints, to maintain their efficacy at the time of use. Even 
packaging for pet food uses flexible packaging to deliver fresh and 
healthy meals to a variety of animals. Carryout, take-out food 
containers, and e-commerce delivery, which are increasingly important 
during this time, are also heavily supported by the flexible packaging 
industry. Thus, the flexible packaging industry is vital to the supply 
chain when addressing the needs of U.S. consumers in responding to the 
COVID-19 crisis.

FPA supports efforts to protect domestic manufacturing; however, any 
such efforts must consider the impact and consequences on all U.S. 
manufacturing industries. The Administration should find ways to 
improve our country's competitiveness. Everybody loses in unfair trade 
cases, especially the U.S. consumer. FPA's members look forward to 
supporting the new aluminum foil assets coming online in the next few 
years in the U.S., but until there is enough aluminum foil in the 
quantities and quality that our manufacturers need through domestic 
suppliers, they should not continue to be saddled with the cost and 
administrative burdens that the current tariffs, exclusionary process 
and proposed monitoring program impose.

                                 ______
                                 
             Motor and Equipment Manufacturers Association

                  1030 15th Street, NW, Suite 500 East

                          Washington, DC 20005

                             (202) 393-6362

                              www.mema.org

MEMA and the COVID-19 Challenge

    The Motor and Equipment Manufacturers Association (MEMA) is the 
leading trade association representing U.S. motor vehicle parts 
suppliers. Our 1,000 member companies manufacture and remanufacture 
components, technologies, and systems for use in passenger vehicles and 
heavy trucks. In total, vehicle parts manufacturers rep resent the 
largest sector of manufacturing jobs in the United States, directly 
employing nearly 900,000 Americans i n all 50 states and generating 2.4 
percent of U.S. GDP.\1\
---------------------------------------------------------------------------
    \1\ MEMA represents its members through four divisions: Automotive 
Aftermarket Suppliers Association (AASA); Heavy Duty Manufacturers 
Association (HDMA); Association for Sustainable Manufacturing (MERA); 
and Original Equipment Suppliers Association (OESA). Suppliers are the 
largest employers of manufacturing jobs in the United States, directly 
employing over 871,000 workers with a total employment impact of 4.2 
million jobs.

    MEMA applauds the bipartisan actions of Congress and Trump 
Administration to address the national health and economic crisis 
brought on by the COVID-19 global pandemic. While we deeply appreciate 
the nearly $3 trillion in relief for the national economic rapidly 
passed on a bipartisan basis, many motor vehicle parts manufacturers 
are still struggling. Recently, almost 20 percent of our members 
reported a severe liquidity crisis that could lead to bankruptcy in the 
next eight weeks. These manufacturers are primarily mid-size suppliers. 
If their operations close or slow production, the entire supply base is 
---------------------------------------------------------------------------
jeopardized.

    Trade must do its part to alleviate the current economic 
disruptions instead of exacerbating the downturn. Tariff relief should 
be part of the national manufacturing recovery plan. MEMA does not 
support the implementation of new tariffs in a time of national crisis.

    During the COVID-19 pandemic, MEMA companies and their employees 
were able to quickly pivot from normal operations to manufacturing 
critically needed personal protective equipment (PPE). These efforts 
have been focused on addressing the immediate medic al and public 
health crisis facing the United States. For example, many suppliers 
have used 3D printing technology and other manufacturing processes to 
make plastic face masks and shields, while other companies have 
manufactured plexiglas patient enclosures. Others are manufacturing 
components for ventilators. Unfortunately, this work is just a small 
portion of our overall manufacturing footprint. MEMA members need 
additional COVID-19 assistance now to assure the viability of our 
sector. We are grateful for all that the bicameral Michigan delegation, 
bipartisan bicameral leadership, and key committees (including this 
one) are doing to assist.

    MEMA's statement today will focus on the positive aspects of 
current trade policies, the adverse impacts of others and what changes 
would be most helpful to restoring growth to our motor vehicle part and 
component sector, and to manufacturing and to the economy as a whole . 
Thank you for this opportunity to submit this statement.

USMCA

    The United States Mexico Canada Agreement (USMCA) will strengthen 
North American supply chains and U.S. economic growth, starting with 
the July entry into force and beyond. With 90 percent support in the 
Congress, the USMCA may prove to be a new model for trade in the 
hemisphere and beyond the impact of USMCA will be significant. MEMA was 
one of the earliest supports of the USMCA as we understood it would 
enhance the regional economy in our sector.

    The Office of the United States Trade Representative (USTR) and the 
U.S. International Trade Commission (US ITC) estimated job growth of up 
to 80,000 motor vehicle and parts jobs as a result of this trade deal. 
We also appreciate the need for increased regional value content, 
(RVC), new labor value content (LVC), and new steel and aluminum rules. 
However, these changes will not be without challenges.

    MEMA is grateful for the transparent process with which USTR has 
engaged stakeholders on auto rule of origin (ROO) issues. The continued 
open door in the development of Uniform Regulations for the three 
nations, is appreciated by our sector. We look forward to reviewing the 
domestic labor regulations to implement the LCV provisions and will pay 
special attention to making sure that they are practical to implement 
and do not violate proprietary obligations of our companies. We are 
also awaiting more details on the USTR/Customs and Border Protection 
(CBP) informed compliance plans to December 31, 2020 and perhaps 
beyond. We are appreciative that USTR is willing to provide some 
flexibility in implementation.

    In addition, we appreciate the bipartisan commitment and efforts of 
the staff of the Finance Committee to fix an inadvertent error and make 
the merchandize processing fee (MPF) fully refundable after importation 
of products. We urge you to pass a technical corrections amendment 
through the Congress on this issue by bring this over the finish line 
by July 1 or slightly thereafter. This action would make USMCA MPF 
commitments consistent with all other trade agreements, including the 
NAFTA. It also relieves a significant financial burden on our companies 
at a time of liquidity crises, falling profits and economic disruption.

    The U.S. must be careful to respect the tri-national values of this 
agreement. We should not undertake problematic new Section 232 
investigations against allies on aluminum or electrical steel or any 
commodity. If there are issues to be adjudicated, they should be 
pursued through appropriate multilateral dispute resolution channels.

    Finally, we also deeply appreciate all that the U.S. Department of 
State, USTR and other agencies have done to make sure that Mexican 
supply chains are up and running during the COVID-19 crisis in the 
essential auto parts industry. We also appreciate the commitment of the 
Mexican government to re-open production to keep supply chains fully 
operational. We would urge all parties to discuss how to best define 
``essential businesses'' for the future and how the parties would 
coordinate any future crisis that requires the closure of major 
manufacturing facilities. We urge Ambassador Lighthizer and his 
counterparts in Mexico and Canada to quickly negotiate North American 
Cybersecurity and Infrastructure Security Agency (CISA) standards for 
all three nations so that there is consistency of essential industry 
and worker designations in national emergencies and pandemics.

TARIFF RELIEF

    The suspension of current China 301 and Section 232 steel and 
aluminum tariffs for the remainder of the year will have a dramatic 
positive impact that will provide one means to restore industry growth.

    We oppose the imposition of any additional tariffs and are grateful 
that President Trump recognizes the grave market and overall negative 
economic impact of imposing Section 232 tariffs on motor vehicles and 
parts imported from allies. One study done prior to the pandemic 
projected a job loss of up to 700,000 and motor vehicle price increase 
of up to $7,000.

    We also urge Congress to develop a plan to permanently phase out 
existing 232 and 301 tariffs. This could be done as part of important 
phase two China and Japan trade negotiations and to jump start trade 
negotiations with the EU.

    Last year, the Federal Reserve estimated that tariffs increased 
since 2017 will lower GDP growth one percent in 2020.\2\ Given that the 
economy is entering a significant recession, these tariffs are only 
making recovery more difficult.
---------------------------------------------------------------------------
    \2\ Feds Note, ``Does Trade Policy Uncertainty Affect Global 
Economic Growth?'', September 4, 2019, the Federal Reserve.
---------------------------------------------------------------------------

CHINA

    China's systemic challenges to the global motor vehicle parts 
sector are based on market distorting policies such as massive 
government subsidies to national champion companies, systemic stealing 
of intellectual property, export performance requirements and a large 
role for state owned enterprises in our sector and many others. Yet the 
rapid growth in the Chinese market has necessitated the presence of our 
member companies in that nation.

    While we understand the efforts by the Trump Administration to 
protect long term investments in China and to level the playing field 
to engage more production back here in the U.S., MEMA favors the 
gradual re-orientation of China to market based policies. We urge 
continued dialogue, building on the success of the Phase One China 
agreement. While that agreement may not achieve all the progress we 
anticipated in the first year due to the COVID-19 crisis, we are 
confident that the scrutiny of this Administration and this Congress 
will achieve as much progress as possible that can be built upon in 
2021.

RE-SHORING MANUFACTURING

    Re-shoring of U.S. manufacturing jobs is rightly an increasing 
bipartisan public policy priority in Washington. Re-shoring can enhance 
U.S. global competitiveness and job creation. The USMCA and its 
regional value content, labor value content and steel and aluminum 
provisions all encourage re shoring from Europe and Asia.

    The best way to encourage job creation at home is by those types of 
positive incentives, rather than punitive trade measures. The 
imposition of tariff s will not encourage reshoring. By contrast, that 
type of action will increase pressures on companies to focus on Europe, 
China, or other Asian markets.

    Approaches that would facilitate resourcing include new tax credits 
and grants for research and development and capital equipment 
investment and better new facility development incentives on the 
federal level. Worker training is even more important in a time when a 
motor vehicle is now a mobile technology platform. All of these are 
important federal priorities at a time when states do not have the 
resources to assist in these areas.

    Finally, we urge the establishment of a new federal Automotive 
Component Technology (ACT) grant program to explicitly encourage 
relocation to the U.S. of research, development and production of 
sophisticated transportation-related technologies and components.

    Thank you for your leadership in these challenging times and for 
your consideration of these ideas and requests. We look forward to any 
follow-up questions and/or reactions. Please contact Ann Wilson, Senior 
Vice President of Government Affairs at [email protected], or Bill 
Frymoyer. Vice President of Public Policy at [email protected], if we 
can be of assistance regarding this statement or more broadly on these 
subject matters.

                                 ______
                                 
                       National Retail Federation

                  1101 New York Avenue, NW, Suite 1200

                          Washington, DC 20005

                              www.nrf.com

                                                       July 1, 2020

The Honorable Chuck Grassley        The Honorable Ron Wyden
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
Washington, DC 20510                Washington, DC 20510

Re:  Hearing on the 2020 Trade Policy Agenda (June 17, 2020)--
Submission by the National Retail Federation

Dear Chairman Grassley and Ranking Member Wyden:

    In conjunction with the June 17th hearing on President Trump's 
``2020 Trade Policy Agenda,'' the National Retail Federation (NRF) is 
pleased to provide the following views on the impacts that agenda is 
having to date on American consumers and the U.S. retail industry.

    The National Retail Federation, the world's largest retail trade 
association, passionately advocates for the people, brands, policies 
and ideas that help retail thrive. From its headquarters in Washington, 
DC, NRF empowers the industry that powers the economy. Retail is the 
nation's largest private-sector employer, contributing $3.9 trillion to 
annual GDP and supporting one in four U.S. jobs--52 million working 
Americans. For over a century, NRF has been a voice for every retailer 
and every retail job, educating, inspiring and communicating the 
powerful impact retail has on local communities and global economies.

    The Administration has made trade policy and trade enforcement a 
priority over the past couple of years. The United States faces a 
number of sometimes longstanding trade irritants that need new 
approaches to repair, and the Administration has indeed proceeded to 
address some of those irritants using tools not heretofore favored by 
most U.S. policymakers. NRF believes it is imperative that Congress 
exercise its oversight duties to ensure those approaches consider the 
impacts of those tools on all segments of the U.S. economy, most 
especially American consumers and families and those employed in 
services sectors like retailing.

    In addition, several pending trade programs that are of importance 
to retailers must be addressed by Congress and the Administration in 
the remaining months of this year. Finally, negotiation and 
implementation of new trade agreements will set precedents for how they 
will work effectively to the benefit of the U.S. economy and U.S. 
consumers. Congress must ensure that these agreements fully embrace the 
elimination of costly bilateral and regional barriers to trade and that 
implementation does not adversely impact one important segment of the 
economy (e.g., consumers) in an effort to favor another (e.g., U.S. 
manufacturers). Similarly, U.S. leadership at the World Trade 
Organization must be maintained, and threats to pull back from the 
trade liberalization we have embraced and achieved there or, worse, 
withdraw from that organization must be defeated.

Tariff Policy

    Concern about China's trade practices and their adverse effects on 
U.S. companies and investors is nothing new. Calls from industry and 
even Members of Congress to address those practices with penalty 
tariffs is also nothing new. But the actual resort to the imposition of 
tariffs as a way to motivate change by China's leadership, as this 
Administration has done, is new. While the President and Ambassador 
Lighthizer argue that the tariffs have been successful in motivating 
real change in China's offensive trade practices and the resulting 
Phase One trade deal, those tariffs have imposed heavy costs on U.S. 
companies (most notably, small businesses), workers and American 
families. Many are struggling today as a result of these extra taxes, 
which they have had to absorb and can't pass along to their consumers. 
We are especially concerned about how the exclusion process has worked 
to date.

    The Administration has also imposed tariffs on a range of consumer 
goods, from food products to housewares, imported from Europe and sold 
by American retailers. Some of these products (Italian olive oil, 
French wines) are only available from European suppliers, so retailers 
are forced to pay the tariffs and either absorb them or pass them on to 
consumers. And the Administration has threatened to impose tariffs on 
other U.S. imports from a large number of countries that are 
contemplating, or have already assessed, digital sales taxes. These 
U.S. tariffs, threatened or imposed, have had no adverse impacts on the 
object of the dispute that triggered them--Airbus, or European tax 
authorities generally--and thus have had no impact that we can 
ascertain on resolving those disputes.

    Similarly, this Administration has sought to address problems 
associated with oversupply of steel and aluminum by imposing tariffs on 
U.S. imports of those products from a number of countries. Those 
trading partners have responded with retaliatory tariffs. Those tariffs 
have hurt U.S. exports, which include consumer goods made in the United 
States and sold by U.S. retailers with stores in the retaliating 
countries.

    These tariffs are having a large negative impact on the U.S. 
economy, workers, retailers and consumers. This has been demonstrated 
both anecdotally and by a growing body of research by academic 
economists. Studies find that the tariffs are paid by U.S. importers 
and others on the U.S. side of the border--not China or Airbus.\1\
---------------------------------------------------------------------------
    \1\ ``[T]he U.S. tariffs were almost completely passed through into 
U.S. domestic prices, so that the entire incidence of the tariffs fell 
on domestic consumers and importers up to now, with no impact so far on 
the prices received by foreign exporters.'' Mary Amiti (Federal Reserve 
Bank of New York), Stephen J. Redding (Princeton) and David Weinstein 
(Columbia), March 2019, https://www.princeton.edu/reddings/papers/
CEPR-DP13564.pdf; ``This nearly complete passthrough of tariffs to the 
total price paid by importers suggests the tariff incidence has fallen 
largely on the U.S.'' [emphasis added], Alberto Cavallo and Gita 
Gopinath (Harvard), Brent Neiman (University of Chicago) and Jenny Tang 
(FRB of Boston), May 2019, https://scholar.harvard.edu/files/
CGNT_0.pdf; ``Chinese exporters did not lower their dollar prices by 
much, despite the recent appreciation of the dollar. . . . In U.S. 
stores, the price impact is more limited, suggesting that retail 
margins have fallen. Our results imply that, so far, the tariffs' 
incidence has fallen in large part on U.S. firms,'' i.e., retailers for 
consumer goods, wholesalers and other direct importers for other goods. 
Alberto Cavallo, Gita Gopinath, Brent Neiman and Jenny Tang, Alberto 
Cavallo and Gita Gopinath (Harvard), Brent Neiman (University of 
Chicago) and Jenny Tang (FRB of Boston), October 2019, https://
www.nber.org/papers/w26396.

    The tariffs have imposed a cost to the U.S. economy broadly, and to 
consumers of some tariffed products specifically.\2\ Tariffs have had a 
negative impact on American jobs.\3\ Retailers have been uprooting 
their supply chains to the extent they can, but there are challenges to 
moving supply chains, if at all possible. It can take months, if not 
years to find new vendors that meet all of a retailer's requirements, 
including quality, quantity and safety. Finding capacity and an 
available skilled workforce in other countries to produce the volumes 
of products sourced from China at prices consumers will pay is a 
challenge and not easily done in time to avoid paying tariffs on goods 
from China This has certainly become more complicated as a result of 
the coronavirus and the impact on business operations. Small retailers 
particularly have no ability to modify their supply chains directly--
and 95 percent of retailers are small businesses.
---------------------------------------------------------------------------
    \2\ This site has a table comparing cost per household for a 
variety of studies. Estimates of the average cost per household for 
tariffs ranges from $500 to $1,730, https://econofact.org/wp-content/
uploads/2019/10/2-Edits-Table-of-estimates-_1_.pdf.
    \3\ ``We find that tariff increases enacted in 2018 are associated 
with relative reductions in manufacturing employment. . . .'' Tariffs 
increased employment in protected U.S. manufacturing sectors by 0.3%, 
but reduced employment in other sectors by 1.1%, reducing employment on 
net. Adding in retaliation, the authors found that manufacturing 
employment declined by 1.4%.
    December 2019, Aaron Flaaen and Justin Pierce (Federal Reserve 
Board), https://www.federalreserve.gov/econres/feds/files/
2019086pap.pdf.

    Our efforts to mitigate some of this damage have been challenged at 
(seemingly) every turn. While the Administration is granting some 
exclusions from the tariffs on a case-by-case basis, it is by no means 
granting every exclusion request with merit. The extension of those 
exclusions that have been granted is also in question. Some extensions 
have been granted, but only for a period of six months. These 
extensions must be granted for a longer period of time so companies can 
continue to try to shift their supply chain, which is not possible for 
every product. In addition, requests that the Administration lift the 
tariffs even temporarily as retailers and others grapple with enormous 
cash-flow issues resulting from the pandemic-triggered near shutdown of 
the U.S. economy have largely fallen on deaf ears. The temporary duty 
deferral program that was announced did not provide enough relief for 
companies that continue to struggle with liquidity issues. It is 
especially important for the Administration and Congress to consider 
tariff relief on coronavirus-related medial and PPE products which are 
so needed right now for retailers to protect their workforce and their 
consumers. We should lower the cost of these products, not artificially 
---------------------------------------------------------------------------
raise them because of tariffs.

    We ask Congress to continue to raise our concerns with the 
Administration and insist that the negative impacts on American 
companies, workers and families be addressed.

Trade Preference Programs

    Pending actions required by the Administration and Congress on U.S. 
trade preference programs offer an opportunity to support American 
families and consumers in the difficult economic environment we now 
find ourselves. These programs are longstanding and should be evaluated 
in terms of the millions of dollars of benefits they provide to 
American companies and their workers. As such, efforts to use them as 
tools to advance other trade agendas should be harnessed.
1. Generalized System of Preferences and Other Trade Preference 
        Programs
    NRF and the retail industry strongly support renewal of the 
Generalized System of Preferences (GSP) and legislative initiatives to 
assist Haiti, including the Caribbean Basin Trade Partnership Act 
(CBTPA). Both await Congressional action. We also believe that 
preferential duty-free treatment under GSP should be expanded to key 
product groups such as textiles, apparel and footwear.

    With respect to GSP, our immediate concern is that the program is 
scheduled to expire on December 31, 2020. The retail industry has 
traditionally accounted for a large segment of American users of the 
program and has been a consistently strong supporter of its renewal 
every time it nears expiration. For many retailers, particularly 
smaller ones, GSP has become a key part of their businesses. 
Legislation removing the statutory exclusion for travels goods (passed 
in 2015, with duty-free treatment taking effect in stages in 2016/2017) 
has increased the importance of GSP to retailers in recent years and 
has shifted the sourcing of these products.

    It is important to note that many consumer goods imported from 
developing countries are still subject to significant U.S. duties. 
Therefore, the duty-free benefits of the GSP program provide important 
savings to U.S. retailers that use the program. GSP has also allowed 
retailers to provide their customers--American families--better value 
and selection in the products they sell. By doing so, the benefits of 
trade through this program flow to the American consumer, to the 
retailers and other companies that are made more competitive through 
the program, and to the beneficiary countries, many of which rely on 
exports of consumer products for their economic development.

    Given these considerations, it is important to the U.S. retail 
industry that GSP be renewed before it expires. The GSP legislative 
history of expirations and retroactive renewals, including a two-year 
lapse from mid-2013 to mid-2015, caused a great deal of 
unpredictability and unnecessary costs for companies that use GSP. 
Lapses followed by retroactive renewals undermine the utility and 
benefits of the program. As noted above, retailers already are dealing 
with tariffs on China and other trading partners, the impacts of COVID-
19 shutdowns, and the related economic fallout: The last thing 
retailers and other businesses need is further uncertainty about 
potential GSP expiration on January 1st. With retailers typically 
placing orders six months in advance of delivery, the time for Congress 
to act is now.

    NRF is supportive of efforts to eliminate the GSP statutory 
exclusion on apparel and footwear, similar to the elimination for 
travel goods in 2015. It is not our expectation that all apparel and 
footwear would gain duty-free treatment since individual products would 
need to go through the petition process. However, extending GSP 
benefits for certain apparel and footwear would provide retailers with 
considerably more cost-effective options to shift supply chains out of 
China in the medium term. GSP for China's competitors also would avoid 
the higher taxes on American consumers--and retaliatory tariffs on U.S. 
exports-that are the result of the Section 301 tariffs currently 
imposed on some of these imports from China. We recognize these changes 
may not be best suited for a reauthorization bill, just as the travel 
goods expansion was passed separately from the GSP reauthorization in 
2015, but believe they would have significant, long term benefits for 
American companies, workers and consumers.

    NRF opposed the recent termination of GSP eligibility for 
developing countries such as India and Turkey, and the partial 
suspension for Thailand. While American companies have paid hundreds of 
millions of dollars in new tariffs as a result of these actions, 
tariffs have not led to desired changes in the practices that were used 
to justify the country practice reviews. The result has been a lose-
lose situation for American importers and exporters. To the extent that 
the Administration is attempting to use tariff policies to encourage 
companies to move out of China, GSP actions undermine those efforts, as 
companies lose viable sourcing alternatives when tariffs are raised on 
China's competitors. The partial GSP suspension for Thailand in April 
2020, and pending reviews for other major GSP suppliers such as 
Indonesia, further limit retailers' ability to make long-term sourcing 
plans. The complexity of global supply chains, and competing goals of 
U.S. tariff policy, illustrate why the GSP eligibility criteria should 
be used with caution.

    The GSP program traditionally has been non-controversial and has 
enjoyed wide, bipartisan support in Congress. We urge Congress to move 
quickly to extend the current GSP authorization and ensure we do not 
face another tariff hike on January 1st.

    With respect to CBTPA, we have similar concerns associated with its 
scheduled expiration on September 30, 2020. CBTPA provides duty-free 
treatment for certain textiles, footwear, tuna, leather goods, travel 
goods, and watches and watch parts when imported from Barbados, Belize, 
Curayao, Guyana, Haiti, Jamaica, Saint Lucia and Trinidad and Tobago. 
We urge Congress to extend the current CBPTA authorization, possibly in 
conjunction with GSP, to ensure these products do not face higher 
tariffs starting October 1st.
2. Miscellaneous Tariff Bill
    NRF and the retail industry strongly support the congressional 
passage of the latest Miscellaneous Tariff Bill (MTB), which allows for 
duty-free treatment for certain products not available in the United 
States. The current MTB, enacted in 2018, expires on December 31st. The 
current MTB provides duty-free treatment for certain jackets, babies' 
garments, hats and other clothing, belts, flat goods, footwear and a 
range of other consumer goods.

    The International Trade Commission (ITC) launched its process for 
the next MTB bill in October 2019. Many retailers have submitted 
petitions for new or continued MTBs, and the ITC sent preliminary 
recommendations to Congress on June 9th. Once the ITC sends its final 
report, we urge Congress to compile and pass MTB legislation to ensure 
we do not face another tariff hike on January 1st.

Trade Agreements

    The United States is set today to implement the United States-
Mexico-Canada Agreement (USMCA), which will replace the North American 
Free Trade Agreement (NAFTA). This agreement is being touted as the 
model for future trade agreements the Administration intends to 
negotiate, for example with the United Kingdom.
1. U.S.-Mexico-Canada Agreement
    While in some details the USMCA is a step back for retailers,\4\ 
overall we are supportive of the Agreement and will work with the 
Administration and our suppliers in Mexico and Canada to seek its 
smooth implementation. It is important for our customers that the USMCA 
preserve longstanding supply chains that have developed under NAFTA. 
For example, jeans made in Mexico contain a large number of U.S. 
inputs, from cotton and denim fabric to notions and accessories like 
buttons and zippers.
---------------------------------------------------------------------------
    \4\ For example, we anticipate that the rules of origin for 
automobiles will increase the costs of cars sold in the United States 
relative to what they would have cost under NAFTA. Similarly, apparel 
rules of origin are more restrictive, which could require cost 
increases for some products produced in Mexico under USMCA.

    We ask Congress to ensure both Canada and Mexico's full 
implementation of their obligations under the Agreement. One area where 
we have heard concerns about Canada's implementation is specific to 
cross-border distribution of U.S. TV shopping programs. This was a 
---------------------------------------------------------------------------
significant victory that needs to be fully implemented.

    We ask Congress to remain vigilant about efforts of some to 
threaten to raise the costs of seasonal agricultural products imported 
from Mexico. Some would revise U.S. trade remedy procedures to make it 
more likely that antidumping duties would be imposed on imports from 
Mexico of these products. This would have a decidedly adverse impact on 
American families shopping for tomatoes and other fruits and vegetables 
during ``off seasons,'' when imports from Mexico make up for the 
absence of supply from U.S. farmers.
2. Other Trade Agreements
    As the Administration moves forward with the negotiation of new 
trade agreements, it has suggested that the USMCA will be something of 
a template. We hope that Congress will ensure that the Administration 
does not seek to lower the U.S. de minimis value threshold for its 
current value of $800. De minimis is an important tool that benefits 
many small retailers and other businesses across the United States by 
cutting red tape at the border while also helping keep prices low for 
consumers Congress rightly raised this threshold from $200 to $800 in 
an effort to promote ecommerce and support consumers purchases of low-
value goods and continues to show bipartisan support for it.

World Trade Organization

    NRF is watching with alarm the suggestions by some in the 
Administration that the United States should back away from its 
obligations to provide most-favored-nation (MFN) tariffs to fellow 
members of the World Trade Organization (WTO), or that the United 
States should raise its bound tariff rates, and then move applied 
tariff rates up to bound rates for certain products imported from 
certain countries. Even worse, some have suggested the United States 
pull out of the WTO altogether, which would have the same impact as 
giving the Administration license to raise its tariffs to exorbitant 
rates. In both instances, not only would U.S. consumers--and the 
economy- suffer, but so would U.S. exports as our trading partners 
retaliate for the higher U.S. import duties.

    NRF is also alarmed that some in the Administration and Congress 
advocate that the United States relinquish its leadership role at the 
WTO by pulling out of it altogether, or by not participating fully in 
plurilateral negotiations that may be happening. U.S. leadership at the 
WTO is a role it has successfully used to cajole tariff and nontariff 
concessions from many U.S. trading partners to the benefit of U.S. 
exporters and the economy generally. We ask that Congress keep a close 
eye on these initiatives, lest they come to pass and seriously damage 
not only the U.S. economy but our standing in the global economy on not 
just economic issues but foreign policy and security issues as well.

Conclusion

    In short, there is much for Congress to watch, and much for 
Congress to do, to ensure thatU.S. trade policies contribute positively 
to growth in the American economy, increase employment and enable 
American families to purchase affordably priced products. Retailers 
stand ready to work with you to this end, and look forward to providing 
you with any information you need to better understand how these issues 
will affect your constituents.

            Sincerely,

            David French
            Senior Vice President
            Government Relations

                                 ______
                                 
                        National Taxpayers Union

                        122 C St., NW, Suite 650

                          Washington, DC 20001

                             [email protected]

      Statement of Bryan Riley, Director, Free Trade Initiative, 
                        National Taxpayers Union

I am writing to submit this letter from economists from across the 
country, including individuals who served Presidents ranging from Jimmy 
Carter to Barack Obama and two Nobel laureates, regarding the risk of 
imposing ``Buy America'' controls on medical goods. Their letter was 
initially delivered on May 13, 2020.

Mr. President, Speaker Pelosi, and Leader McConnell:

Government mandates, export controls, and other trade restrictions are 
proliferating around the world as countries confront the COVID-19 
pandemic. Generally inadvisable, these actions will undermine a strong 
recovery.

The United States has already imposed restrictions on the export of 
health and medical resources. Policymakers are considering the 
imposition of new Buy America requirements for medical goods and 
pharmaceutical products, either by executive order or legislation.

Current shortages of critical medical goods in the COVID-19 pandemic 
have revealed to all the desirability of diversifying sources of supply 
and increasing inventory of storable medical goods. Diversifying supply 
sources and increasing inventories will be costly, but a broad Buy 
America regime will be more costly. The variety, supply, and price of 
goods available to Americans will suffer under a broad Buy America 
regime. Taxpayers and patients will pay more for drugs and medical 
supplies. Smart policies such as federal government stockpiling look 
more promising.

A Buy America directive can also hamstring the ability of U.S. 
pharmaceutical and medical equipment manufacturers to meet our future 
needs if firms are denied access to essential foreign supplies. 
Moreover, we can expect our trading partners to adopt retaliatory 
``Don't Buy American'' barriers targeting U.S. exports as this type of 
retaliation is already occurring between other countries.

The President's intuition was correct when in 2018 he called for zero 
tariffs, zero non-tariff barriers, and zero subsidies.

For the United States to make a rapid and strong recovery from the 
pandemic, we urge leaders to stand strong against those in the United 
States and abroad who seek to disrupt trade in essential 
medicalproducts. Instead, the United States and its trading partners 
should pursue policies that make medical supplies more plentiful and 
affordable. Costly protectionism should not be foisted on patients at 
home and abroad.


 
 
 
Susan Ariel Aaronson     Zakary Bishop            Harry G. Broadman
George Washington        University of Idaho      Johns Hopkins
 University and Centre                             University and
 for International                                 Berkeley Research
 Governance Innovation                             Group LLC
 
Bahram Adrangi           Geoffrey A. Black        Gregory J. Brock
The University of        Boise State University   Georgia Southern
 Portland                                          University
 
Dennis J. Aigner         Luisa Blanco             John C.Brown
University of            Pepperdine University    Clark University
 California, Irvine
 
Lee J. Alston            William Blankenau        Kristy Buzard
Indiana University       Kansas State University  Syracuse University
 
James E. Anderson        Wesley Blundell          Per Bylund
Boston College           California State         Oklahoma State
                          University, East Bay     University
 
Richard James Arnott     Elizabeth C. Bogan       Bruce Caldwell
University of            Princeton University     Duke University
 California, Riverside
 
Cristino R. Arroyo       Cecil E. Bohanon         Charles W. Calomiris
Johns Hopkins            Ball State University    Columbia University
 University SAIS
 
Aniruddha Bagchi         Martin Boileau           Donald E. Campbell
Kennesaw State           University of Colorado   The College of William
 University                                        and Mary
 
Dean Baim                Michael Bond             James H. Cardon
Pepperdine University    University of Arizona    Brigham Young
                                                   University
 
Charles W. Baird         Severin Borenstein       Anthony M. Carilli
California State         University of             Hampden-Sydney
 University, East Bay     California, Berkeley     College
 
Humberto Barreto         Barry Bosworth           James L. Caton
DePauw University        Brookings Institution    North Dakota State
                                                   University
 
Atin Basuchoudhary       Donald Boudreaux         Nathan W. Chan
Virginia Military        George Mason University  University of
 Institute                                         Massachusetts,
                                                   Amherst
 
Charles M. Becker        Nicole M. Boyson         Winston Chang
Duke University          Northeastern University  University at Buffalo,
                                                   State University of
                                                   New York
 
Robert L. Beekman        John Charles Bradbury    Yan Chen
University of Tampa      Kennesaw State           University of Michigan
                          University
 
Daniel L. Bennett        Scott Bradford           Menzie D. Chinn
Baylor University        Brigham Young            University of
                          University               Wisconsin, Madison
 
Tibor Besedes            Klajdi Bregu             Harold Christensen
Georgia Institute of     Indiana University,      Delphi Econometrics
 Technology               South Bend
 
Douglas Coate            Jason Brennan            Fabio Gironi
Rutgers University,      Georgetown University    University of
 Newark                                            Washington
 
Warren Coats             Can Erbil                Joseph W. Glauber
International Monetary   Boston College           International Food
 Fund (Retired)                                    Policy Research
                                                   Institute
 
Boyd D. Collier          Fred G. Esposto          Judge Glock
Tarleton State           Kutztown University of   Cicero Institute
 University               Pennsylvania
 
Michael B. Connolly      Yariv Fadlon             Robert Gmeiner
University of Miami      Muhlenberg College       Kennesaw State
                                                   University
 
Mark Copelovitch         Merton D. Finkler        Stephan F. Gohmann
University of            Lawrence University      University of
 Wisconsin, Madison                                Louisville
 
Peter R. Crabb           Price V. Fishback        Nathan P. Goodman
Northwest Nazarene       University of Arizona    George Mason
 University                                        University
 
Erik D. Craft            John A. Flanders         Corbett Grainger
University of Richmond   Central Methodist        University of
                          University               Wisconsin, Madison
 
Peter Cramton            Michele U. Fratianni     Wendy Lee Gramm
University of Maryland   Indiana University       Retired Economist
 
Peri Agostinho Da Silva  Daniel Friedman          Alan P. Grant
 Jr.                     University of            Baker University
Kansas State University   California, Santa Cruz
 
Alan Deardorff           K.C. Fung                Philip E. Graves
University of Michigan   University of            University of
                          California, Santa Cruz   Colorado, Boulder
 
Judith M. Dean           William G. Gale          Theresa M. Greaney
Brandeis University      Brookings                University of Hawaii
 
Jeffery L. Degner, M.A.  Michelle R. Garfinkel    Kenneth V. Greene
Cornerstone University   University of            Binghamton University
                          California, Irvine
 
Alan E. Dillingham       George C. Georgiou       Bronwyn H. Hall
St. Mary's College of    Towson University        University of
 Maryland                                          California, Berkeley
 
Amitabh S. Dutta         Fabio Ghironi            Daniel Hall
Florida Institute of     University of            High Point University
 Technology               Washington
 
Gerald P. Dwyer          Animesh Ghoshal          Steven Hamilton
Clemson University       DePaul University        George Washington
                                                   University
 
Franklin R. Edwards      Michael Giberson         James Hammitt
Columbia University      Texas Tech University    Harvard University
 
Barry Eichengreen        Richard J. Gilbert       Bruce E. Hansen
University of            University of            University of
 California, Berkeley     California, Berkeley     Wisconsin
 
Joseph Haslag            Cem Karayalcin           John S. Lapp
University of Missouri   Florida International    North Carolina State
                          University               University
 
Seid Y. Hassan           Jonathan M. Karpoff      William H. Lehr
Murray State University  University of            Massachusetts
                          Washington               Institute of
                                                   Technology
 
Andreas Hauskrecht       JR Kearl                 Pierre Lemieux
Indiana University       Brigham Young            Independent Institute
                          University
 
Thomas Hazlett           Timothy J. Kehoe         Yang Liang
Clemson University       University of Minnesota  San Diego State
                                                   University
 
David Henderson          Jason T. Kerwin          Tony Lima
Hoover Institution       University of Minnesota  California State
                                                   University, East Bay
 
Michael J. Hicks         Kent Kimbrough           David Lindauer
Ball State University    Duke University          Wellesley College
 
Bradley K. Hobbs         Daniel B. Klein          Christopher Lingle
Clemson University       George Mason University  Universidad Francisco
                                                   Marroquin
 
Stephen P. Holland       Kenneth Kietzer          Charles R. Link
University of North      University of            University of Delaware
 Carolina, Greensboro     California, Santa Cruz
 
Douglas Holtz-Eakin      Christopher Knittel      Hong Liu
American Action Forum    Massachusetts Institute  Washington University
                          of Technology            in St. Louis
 
Jeremy Horpedahl         Paul R. Koch             Xuepeng Liu
University of Central    Olivet Nazarene          Kennesaw State
 Arkansas                 University               University
 
Gary Clyde Hufbauer      Brent Kreider            Ted Loch
Peterson Institute for   Iowa State University    Rice University
 International
 Economics
 
Jennifer Hunt            Pravin Krishna           Mary Lovely
Rutgers University       Johns Hopkins            Peterson Institute for
                          University               International
                                                   Economics
 
Robert Inman             Anne O. Krueger          Ashley Lyman
University of            Johns Hopkins            Professor Emeritus of
 Pennsylvania             University               Economics and
                                                   Statistics,
                                                   University of Idaho
 
J. Bradford Jensen       Kishore G. Kulkarni      David A. Macpherson
Georgetown University    Metropolitan State       Trinity University
                          University of Denver
 
Kent Albert Jones        Praveen Kumar             Burton G. Malkiel
Babson College           University of Houston    Princeton University
 
John H. Kagel            Sumner La Croix          Stephen A. O'Connell
Ohio State University    University of Hawaii     Swarthmore College
 
Yener Kandogan           James Lake               Patrick O'Reilly
University of Michigan,  Southern Methodist       West Virginia
 Flint                    University               University
 
Trey Malone              Robert F. McNown         David Orden
Michigan State           University of Colorado   Virginia Tech
 University               Boulder
 
Khawaja S. Mamun         Brian J. Meehan          Michael J. Orlando
Sacred Heart University  Berry College            University of
                                                   Colorado, Denver
 
Abir Mandal              John Merrifield          Arvind Panagariya
University of Mount      University of Texas at   Columbia University
 Olive                    San Antonio
 
Michael L. Marlow        Ronald I. Miller         Donald O. Parsons
Cal Poly, San Luis       Columbia University      George Washington
 Obispo                                            University
 
Chris Martin             Daniel L. Millimet       Jeffrey M. Perloff
Hillsdale College        Southern Methodist       University of
                          University               California, Berkeley
 
Eric S. Maskin           Devashish Mitra          Timothy J. Perri
Harvard University       Syracuse University      Appalahian State
                                                   University
 
Keith E. Maskus          Devashish Mitra          Mark J. Perry
University of Colorado,  Syracuse University      University of
 Boulder                                           Michigan, Flint
 
Timothy Mathews          James E. T. Moncur       Peter A. Petri
Kennesaw State           University of Hawaii at  Brandeis University
 University               Manoa
 
John G. Matsusaka        John C. Moorhouse        Joshua C. Pinkston
University of Southern   Wake Forest University   University of
 California                                        Louisville
 
Merrill Matthews         Theodore Moran           Alicia Morgan Plemmons
Institute for Policy     Georgetown University,   Southern Illinois
 Innovation               Peterson Institute for   University,
                          International            Edwardsville
                          Economics
 
Steven Matusz            Petra Moser              James E. Prieger
Michigan State           New York University      Pepperdine University
 University                                        School of Public
                                                   Policy
 
Sharon L. May            Jonathan M. Murphy       Thomas J. Prusa
Maryville College        George Mason University  Rutgers University
 
Wolfgang Mayer           Robert Murphy            Reza M. Ramazani
David Sinton Professor,  Boston College           Saint Michael's
 University of                                     College
 Cincinnati
 
Daniel McFadden          Usha Nair-Reichert       R. David Ranson
University of            Georgia Institute of     HCWE&Co
 California, Berkeley     Technology
 
Warwick J. Mckibbin      Douglas Nelson           Surekha K. Rao
Brookings Institution    Tulane University        Indiana University
                                                   Northwest
 
Walter W. McMahon        Pamela J. Nickless       Jeffrey W. Steagall
University of Illinois   UNC Asheville            Weber State University
 at Urbana-Champaign
 
Gordon C. Rausser        Raymond C. Niles         Houston H. Stokes
University of Calfomia,  DePauw University         University of
 Berkeley                                          Illinois at Chicago
 
Ranajoy Ray-Chaudhuri    James W. Saunoris        Sebastian Strauss
Muhlenberg College       Eastern Michigan         The Brookings
                          University               Institution
 
Arthur J. Raymond        Frederic Sautet          Daniel A. Sumner
Muhlenberg College       The Catholic University  University of
                          of America               California, Davis
 
Alessandro Rebucci       Richard L. Schmalensee   Scott Sumner
Johns Hopkins            MIT                      Bentley University
 University
 
Kara M. Reynolds         Carol A. Scotese         Steven M. Suranovic
American University      Virginia Commonwealth    George Washington
                          University               University
 
Sherman Robinson         Carlos Seiglie           Constantinos
Nonresident Senior       Rutgers University,       Syropoulos
 Fellow, Peterson         Newark                  Drexel University
 Institute for
 International
 Economics
 
Malcolm Robinson         Gautam Sethi             Steve Szeghi
Thomas More University   Bard College             Wilmington College
 
Andrew K. Rose           Stephen J. Silver        Robert Tatum
University of            The Citadel              University of North
 California, Berkeley                              Carolina, Asheville
 
Justin M. Ross           Nirvikar Singh           Linda L. Tesar
Professor of Public      University of            University of Michigan
 Economics, Indiana       California, Santa Cruz
 University
 
Elyce J. Rotella         Timothy M. Smeeding      Clifford F. Thies
University of Michigan   University of            Shenandoah University
                          Wisconsin, Madison
 
John Ruggiero            Daniel Joseph Smith      Lloyd Thomas
University of Dayton     Middle Tennessee State    University of
                          University               Missouri
 
Thomas F. Rutherford     Jeffrey A. Smith         James B. Thomson
University of Wisconsin  University of            The University of
                          Wisconsin, Madison       Akron
 
Joseph T. Salemo         Pamela J. Smith          Edward J. Timmons
Pace University          University of Minnesota  Saint Francis
                                                   University
 
Tim C. Salmon            Vernon L. Smith          Anh N. Tran
Southern Methodist       Chapman University       Indiana University
 University
 
Emily Sanchez            Vincent Smith            Kenneth Troske
American Chemistry       Montana State            Univerity of Kentucky
 Council                  University
 
Raymond D. Sauer         Thomas J. Snyder         Stephen J. Turnovsky
Clemson University       University of Central    University of
                          Arkansas                 Washington
 
Laura D. Tyson           Robert Sonora            Eric R. Young
University of            University of Montana    University of Virginia
 California, Berkeley
 
Richard Vedder           Geoffrey Woglom          Ernest M. Zampelli
Ohio University          Amherst College          The Catholic
                          (emeritus)               University of America
 
Tam Bang Vu              Michael Wohlgenant       Jeffrey Zax
University of Hawaii at  North Carolina State     University of
 Hilo                     University               Colorado, Boulder
 
Andrea Waddle            Barbara L. Wolfe         Albert Zevelev
University of Richmond   University of            Baruch College
                          Wisconsin, Madison
 
Gary A. Wagner           Art Woolf                Buhong Zheng
University of Louisiana  University of Vermont    University of
 at Lafayette                                      Colorado, Denver
 
Megan M. Way             Brian D. Wright          John Jeffrey Zink
Babson College           University of            Morningside College
                          California, Berkeley
 
David E. Weinstein       Robert E. Wright         Joseph A. Zoric
Columbia University      Augustana University     Franciscan University
                                                   of Steubenville
 
Frank D. Weiss           Bruce Yandle             Thomas Zylkin
(Retired)                Clemson University       University of Richmond
 
Christopher Westley      Gary W. Yohe             Yoto V. Yotov
Florida Gulf Coast       Wesleyan University      Drexel University
 University               (emeritus)
 


                                 ______
                                 
                   U.S. Global Value Chain Coalition

                           740 6th Street, NW

                          Washington, DC 20001

                             (202) 853-9080

                    https://usglobalvaluechain.com/

These comments are being filed on behalf of the U.S. Global Value Chain 
Coalition--a coalition of U.S. companies and associations--that is on a 
mission to educate policymakers and the public about the American jobs 
and the domestic economic growth our companies generate through their 
global value chains.

Global value chains include those jobs we traditionally associate with 
the creation of a product--such as those in a factory or on a farm--as 
well as those positions involved in the conceiving of and delivery of 
those products--such as design, marketing, research and development, 
logistics, compliance, and sales. Simply put, the global value chain 
accounts for all jobs that add value from beginning to end to the good 
or service sold in the global marketplace. These positions are 
essential to the creation or sale of a good or service. Moreover, these 
jobs are primarily here in the United States and are usually high 
paying, accounting for much of the value that is paid at the register.

Thank you for holding these important hearings on the U.S. 2020 Trade 
Policy Agenda and providing the opportunity to provide this statement 
for the record. We would like to respond to several points on China and 
trade preference programs that Ambassador Robert Lighthizer made during 
his testimony.

China

Global value chains are dependent upon trade with China to create jobs 
and economic opportunities across the United States. For instance, 
American companies, and their American workers, design and market 
consumer products that are sold in China, in the United States, and 
around the world. Although these everyday items--articles such as U.S. 
branded clothes, shoes, and backpacks--might be physically produced in 
China, they support millions of U.S. jobs in such disciplines as 
design, quality control, marketing, and compliance.

Furthermore, chemicals imported from China make their way through a 
network of U.S. distributors, employing tens of thousands of Americans 
who reformulate, market, and distribute into American industries, 
including agriculture, automotive, pharmaceuticals, textiles, plastics, 
paints and coatings, and more.

The punitive tariffs on U.S. imports from China have been very damaging 
to these U.S. global value chains. These tariffs have led to 
considerable costs and uncertainty for our members because tariffs are 
no more than taxes that U.S. companies pay, which are then passed on to 
U.S. consumers in the form of higher prices. Even before the 
coronavirus pandemic, these tariffs have required companies to make 
painful choices--usually at the expense of American jobs--as they 
figure out ways to manage these new costs. Now more so than ever, 
thousands of companies are facing a stark choice of paying their duty 
bills now or keeping their American workers on payroll.

Despite what Ambassador Lighthizer said, it is not easy for companies 
to shift their global value chains. While many have worked to diversify 
their value chains from the start of the trade war, there are others 
where it is just not feasible in a short period of time--if at all. 
There are many challenges such as ensuring new vendors can meet 
capacity, quality, product safety, sustainability, and social 
responsibility requirements, the availability of a skilled work force, 
available infrastructure, and testing and auditing capabilities--just 
to name a few. In some instances, a product may not be available from 
any other source. Further, the coronavirus pandemic has made shifting 
supply chains even more complicated with travel essentially shut down 
due to global stay at home orders and limits on corporate travel. This 
should certainly be factored in as the Administration reviews current 
exclusions.

Further, global supply chains have helped, not hurt, the U.S. response 
to the coronavirus outbreak. Just recently, a study done by the 
University of Michigan, Yale, and the University of Texas at Austin 
concluded that while ``the average contraction in gross domestic 
product tied to the COVID-19 shock is expected to be 31.5% with about a 
third of it attributed to kinks in global supply chains . . . the 
average GDP drop would have been 32.3%'' without global trade.\1\
---------------------------------------------------------------------------
    \1\ Brendan Murray, ``Trade Helped Cushion the World Economy's 
Pandemic Plunge,'' Bloomberg News (May 26, 2020) available at https://
www.bloomberg.com/news/newsletters/2020-05-26/supply-chains-latest-
trade-cushioned-the-world-economy-s-fall.

As we work to reopen the U.S. economy and get Americans back to work, 
we request Congress: (1) demand the Administration lift all punitive 
China tariffs; (2) improve the Section 301 product exclusion process 
and grant more approvals in a swift, transparent manner; (3) eliminate 
Most Favored Nation (MFN) tariffs for all products and inputs for 
Personal Protective Equipment (PPE); and (4) extend and modify the duty 
deferral program to cover ALL duties for imports through at least the 
summer months, allow for retroactive refunds, and improve the hardship 
test to allow more companies to defer duties.

Trade Preference Programs

Several trade preference programs are expiring this year and although 
there has not been a clear signal of support from the Administration, 
they have bipartisan, bicameral support. We request Congress renew 
these critical trade preference programs quickly to provide certainty 
and predictability to American businesses, many of whom are utilizing 
these programs to help make and distribute urgently needed personal 
protective equipment in response to the coronavirus outbreak.
Caribbean Basin Trade Partnership Act (CBTPA)
The Caribbean Basin Trade Partnership Act (CBTPA) recently celebrated 
its 20th anniversary and is set to expire on September 30, 2020. With 
the coronavirus crisis, providing continued certainty in this region is 
needed now more than ever. Our members have been proud to work on, 
support enactment of, and operate under this program during the past 
two decades. Since it was enacted, the CBTPA along with the Haitian 
Hemispheric Opportunity through Partnership Encouragement (HOPE) Act, 
and the Haiti Economic Lift Program (HELP) Act--has provided an 
important trade policy basis to supportU.S. investment in and exports 
to U.S. allies in the Caribbean Basin.
Generalized System of Preferences (GSP)

The Generalized System of Preferences (GSP) is set to expire at the end 
of 2020. The GSP program allows American businesses to use duty-savings 
to compete internationally, lower costs for American families, hire 
more American workers, and invest in new products. GSP is also an 
effective enforcement tool to open foreign markets, protect 
intellectual property, and improve workers' rights. With the 
coronavirus debilitating global value chains, renewing the GSP program 
will be a critical component to reopening the country and improving the 
U.S. economy.

Thank you for this opportunity to provide comments on the 2020 U.S. 
Trade Policy Agenda.

                                   [all]